IMF says global economy will shrink 3% this year because of COVID-19
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The International Monetary Fund issued its 2020 World Economic Outlook Tuesday, and it is grim. The IMF says we’re on the brink of the worst economic downturn since the Great Depression. There’s lots of uncertainty; everything depends on the trajectory of the coronavirus.
The organization predicts the global economy will shrink by 3% this year and that the world’s economic output will plummet $9 trillion over two years. How does it know this? It doesn’t actually know for sure.
“This is one of the hardest forecasting jobs we’ve had to do,” said Gita Gopinath, the IMF’s chief economist and author of the report. Even she acknowledges it could be wrong. Gopinath has never seen anything like this. She said she had to improvise.
“We spent a lot of time talking to epidemiologists and public health officials,” Gopinath said. “That’s not something we’ve ever done in the past. In that sense it’s very different, this time around.”
Gopinath also factored in how social distancing is affecting businesses like restaurants, movie theaters and stores, and the countries that rely most on those sectors. She looked at who has the best healthcare systems and what each country is doing to prop up its economy. And she’s baked in uncertainty — she expects to revise her report. Gregory Daco, the chief U.S. economist at Oxford Economics said that’s no surprise.
“We’re looking at forecasts that may change dramatically over the course of a day, or even an hour, based on a policy decision,” Daco said.
The IMF forecast could be downgraded. The report already says if the pandemic doesn’t recede in the second half of this year, global economic growth will shrink by 6%.
COVID-19 Economy FAQs
Are states ready to roll out COVID-19 vaccines?
Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.
How is the service industry dealing with the return of coronavirus restrictions?
Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.
How are hospitals handling the nationwide surge in COVID-19 cases?
As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.
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