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
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
Give me a snapshot of the labor market in the U.S.
U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
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