IMF warns global economy faces deeper downturn

WASHINGTON — The International Monetary Fund warned Wednesday the global economy faces an even deeper downturn than it previously projected as businesses around the world struggle to operate amid the coronavirus pandemic.

The forecast underscores the scale of the task policymakers are facing as they try to dig out from what the IMF has described as the most severe economic contraction since the Great Depression. Even as countries begin reopening their economies, it is increasingly evident that the recovery will be uneven and protracted as cases continue to surge and consumers remain wary of resuming normal activity.

More than 35,000 new coronavirus cases were identified across the United States on Tuesday, according to a New York

Times database, the highest single-day total since late April and the third-highest total of any day of the pandemic. Other countries are also experiencing surges in new cases, complicating plans to reopen the global economy.

In an update to its World Economic Outlook, the IMF said it expected the global economy to shrink 4.9% this year — a sharper contraction than the 3% it predicted in April.

The fund noted that, even as businesses began to reopen, voluntary social distancing and enhanced workplace safety standards were weighing on economic activity. Moreover, the “scarring” of the labor force from mass job cuts and business closures means that the world economy will recover much more slowly, with the IMF projecting 5.4% global growth in 2021, far below its pre-pandemic projections.

Overall, the IMF expects that the cumulative loss of total output for the global economy this year and next year will top $12 trillion.

“We are definitely not out of the woods,” said Gita Gopinath, director of the IMF’s research department. “This is a crisis like no other and will have a recovery like no other.”

The IMF forecast is more grim than global projections outlined earlier this month by the Organization for Economic Cooperation and Development. And its U.S. forecast for 2020 is also less optimistic than what the Congressional Budget Office and the Federal Reserve have projected.

The IMF now projects that the U.S. economy will shrink 8% this year before expanding 4.5% next year.

The Fed in June projected a particularly sharp economic hit in 2020, with officials expecting output to contract by 6.5% at the end of this year compared to the final quarter of 2019, before rebounding by 5% in 2021. A May report from the CBO forecast a 5.6% contraction in the United States this year.

Gopinath said in a news briefing the world was facing the worst downturn since the Great Depression. However, she said that the depth and duration of the economic collapse were not expected to be as severe, given the strength of the economy going into the crisis and the relative stability of the financial system.