IMF predicts deeper global recession due to COVID-19

Washington (Reuters): The coronavirus pandemic has caused wider and deeper damage to economic activity than first thought, the International Monetary Fund said on Wednesday, prompting the institution to slash its 2020 global output forecasts further.

The IMF said it now expects 2020 global output to shrink by 4.9%, compared with a 3.0% contraction predicted in April, when it used data available as widespread business lockdowns were just getting into full swing.

A recovery in 2021 also will be weaker, with global growth forecast at 5.4% for the year compared to 5.8% in the April forecast. The Fund said, however, that a major new outbreak in 2021 could shrink the year’s growth to a barely perceptible 0.5%.

Although many economies have begun to reopen, the Fund said that the unique characteristics of lockdowns and social distancing have conspired to hit both investment and consumption.

“We are definitely not out of the woods. We have not escaped the Great Lockdown,” IMF Chief Economist Gita Gopinath told a news conference. “Given this tremendous uncertainty, policymakers should remain vigilant.” 

The IMF views the current recession as the worst since the 1930s Great Depression, which saw global GDP shrink 10%, but Gopinath said that the $10 trillion in fiscal support and massive easing by central banks had so far prevented large-scale bankruptcies. More support will be needed, she added.

Advanced economies have been particularly hard-hit, with US output now expected to shrink 8.0% and the euro zone 10.2% in 2020, both more than 2 percentage points worse than the April forecast, the IMF said.

Latin American economies, where infections are still rising, saw some of the largest downgrades, with Brazil’s economy now expected to shrink 9.1%, Mexico’s 10.5% and Argentina’s 9.9% in 2020.

China, where businesses started reopening in April and new infections have been minimal, is the only major economy now expected to show positive growth in 2020, now forecast at 1.0% compared to 1.2% in the April forecast.

WHO-led coalition says $31.3 b needed for tools to fight COVID-19

LONDON, REUTERS: A World Health Organisation-led coalition fighting the COVID-19 pandemic is asking government and private sector donors to help raise $31.3 billion in the next 12 months to develop and deliver tests, treatments and vaccines for the disease.

Renewing its call on Friday for global collaboration against the pandemic, it said $3.4 billion had been contributed for the coalition to date, leaving a funding gap of $27.9 billion. Of that, $13.7 billion was “urgently needed”.

The WHO is working with a large coalition of drug-development, funding and distribution organisations under what it calls the ACT-Accelerator Hub.

The initiative is intended to develop and deliver 500 million COVID-19 tests and 245 million courses of new treatment for the disease to low- and middle-income countries by mid-2021, it said in a statement.

It also hoping two billion vaccines doses, including one billion to be bought by low- and middle-income countries, will be available by the end of 2021.

The ACT-Accelerator was launched in April to speed up research and development work on medical tools to tackle COVID-19. On Friday, the WHO said the pandemic was still threatening millions of lives and scores of economies, and urgent work and funds were needed.

“The investment required is significant, but it pales in significance when compared to the cost of COVID-19,” it said.

“The total cost of the ACT-Accelerator’s work is less than a tenth of what the IMF estimates the global economy is losing every month due to the pandemic; 468,000 thousand people have already lost their lives.” As the race to find a vaccine has accelerated, governments including the United States and in Europe, have rushed to agree advance purchases of promising coronavirus immunisation treatments.

That has raised concerns about the equitable distribution of and access to supplies of COVID-19 vaccines, tests and treatments, particularly for lower- and middle-income countries.

WHO Chief Scientist Souma Swaminathan said the program had had “really very constructive” engagement with companies about the involvement of the private sector.