The International Monetary Fund downgraded its outlook for the coronavirus-ravaged world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.
The fund said Wednesday it now expected global gross domestic product to shrink 4.9% this year, more than the 3% predicted in April. For 2021, the fund forecast growth of 5.4%, down from 5.8%.
These forecast are dire for a country like Nigeria as the health of the global economy impacts the demand for and price of oil as well as the direction of investment dollars.
Having already warned of the biggest slump since the Great Depression, the IMF said its increased pessimism reflected scarring from a larger-than-anticipated supply shock during the earlier lockdown, in addition to the continued hit to demand from social distancing and other safety measures.
For nations struggling to control the virus spread, a longer lockdown also will take a toll on growth, the IMF said.
“With the relentless spread of the pandemic, prospects of long-lasting negative consequences for livelihoods, job security and inequality have grown more daunting,” the lender said in its update to the World Economic Outlook.
The IMF warned that the rebound in global financial-market sentiment “appears disconnected from shifts in underlying economic prospects,” raising the possibility that financial conditions will tighten more than forecast in its core scenario.
The fund lowered its expectations for consumption in most economies based on a larger-than-expected disruption to domestic activity, demand shocks from social distancing and an increase in precautionary savings.
In recent weeks, the IMF repeatedly notedthat it was likely to downgrade its mid-April forecasts based on incoming data, with chief economist Gita Gopinath saying as early as May 8 that the global outlook had worsened.
The projections assume that countries with declining infection rates don’t need to reinstate the strict lockdowns from the first half of the year and are able to rely on alternative methods such as increased testing, contact tracing and isolation to contain transmission.
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