THE International Monetary Fund (IMF) has forecasted that the Philippine economy will shrink by 3.6 percent this year on the back of the economic damage brought about by the coronavirus pandemic.
This latest forecast was a revision from the 4.2 percent drop the group estimated in April.
The IMF’s updated gross domestic product (GDP) growth estimate was also lower than the government’s estimates of two to 3.4 percent decline.
However, the IMF predicted that the country’s economy will bounce back in 2021 with a 6.8 percent growth.
Meanwhile, the IMF has sharply lowered its forecast for global growth this year.
The global organization predicted that the global economy will shrink 4.9 percent this year, much lower than the three percent drop it estimated in its April report.
For the United States, it predicts that the nation’s gross domestic product will plummet eight percent this year, even more than its April estimate of a 5.9 percent drop.
The IMF issued its bleaker forecasts Wednesday, June 24, in an update to the World Economic Outlook it released in April. The update is generally in line with other recent major forecasts. Earlier this month, for example, the World Bank projected that the global economy would shrink 5.2 percent this year.
“This is the worst recession since the Great Depression,” Gita Gopinath, the IMF’s chief economist, told reporters at a briefing. “No country has been spared.”
Declines in per capita
The IMF noted that the pandemic was disproportionately hurting low-income households, “imperiling the significant progress made in reducing extreme poverty in the world since 1990.”
In recent years, the proportion of the world’s population living in extreme poverty—equivalent to less than US$1.90 a day—had fallen below 10 percent from more than 35 percent in 1990. But the IMF said the Covid-19 crisis threatens to reverse this progress. It forecast that more than 90 percent of developing and emerging market economies will suffer declines in per-capita income growth this year.
For 2021, the IMF envisions a rebound in growth, so long as the viral pandemic doesn’t erupt in a second major wave. It expects the global economy to expand 5.4 percent next year, 0.4 percentage point less than it did in April.
For the United States, the IMF predicts growth of 4.5 percent next year, 0.2 percentage point weaker than in its April forecast.
In its updated forecast, the IMF downgraded growth for all major countries.
For the 19 European nations that use the euro currency, it envisions a decline in growth this year of 10.7 percent—more than the eight percent drop it predicted in April—followed by a rebound to growth of six percent in 2021.
In China, the world’s second-largest economy, growth this year is projected at one percent. India’s economy is expected to shrink 4.5 percent after a longer period of lockdown and a slower recovery than was envisioned in April.
In Latin America, where most countries are still struggling to contain infections, the two largest economies, Brazil and Mexico, are projected to shrink 9.1 percent and 10.5 percent, respectively.
A steep fall in oil prices has triggered deep recessions in oil-producing countries, with the Russian economy expected to contract 6.6 percent this year and Saudi Arabia’s 6.8 percent.
The IMF cautioned that downside risks to the forecast remain significant.
It said the virus could surge back, forcing renewed shutdowns and possibly renewed turmoil in financial markets similar to what occurred in January through March. in early 2021. (KOC with AP)