UK & Euro Area to Lose 10% of GDP This Year, 2021 to Make Up for Just Half of It
France, Spain, Italy to lose over 12%
The UK economy is set to shrink by 10.2 per cent this year as coronavirus hits like a wrecking ball, the IMF said today.
The grim forecast for Britain is significantly worse than the Fund suggested as recently as April – although not as bad as for some other European countries.
The IMF said it now sees more pain around the world, with global output tumbling by 4.9 per cent instead of the 3 per cent expected in April. For the first time, every region of the world will be in recession at once.
The recovery will also be weaker next year, at 5.4 per cent rather than 5.8 per cent.
In a stark warning, it said a resurgence in the pandemic cold send even that figure tumbling to just 0.5 per cent.
The latest UK estimates are for a deeper recession this year than in Japan, Germany, the US and Canada – which are in line for 5.8 per cent, 7.2 per cent, eight per cent and 8.4 per cent falls in GDP respectively.
The 10.2 per cent plunge is 3.7 percentage points bigger than anticipated before.
But other countries are predicted to fare worse, with France facing a 12.5 per cent recession and Italy and Spain 12.8 per cent.
The UK bounceback next year is also greater than some other major economies, at 6.3 per cent – although that would still leave the country significantly less wealthy.
The Fund said despite lockdowns being eased in many places the curbs and social distancing had hit both investment and consumption.
‘Thus, there is a broad-based aggregate demand shock, compounding near-term supply disruptions due to lockdowns,’ the IMF said in an update of its World Economic Outlook forecast.
The eight per cent drop for the US and 10.2 per cent for the Eurozone this year are both more than two percentage points worse than the figures from April.
Latin American economies, where infections are still rising, saw some of the largest downgrades, with the Brazil economy now expected to shrink 9.1 per cent, Mexico’s 10.5 per cent and Argentina’s 9.9 per cent 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, trimmed slightly to 1 per cent compared to 1.2 per cent envisaged two months ago.
The IMF said that more policy actions from governments and central banks would be needed to support jobs and businesses to limit further damage and set the stage for recovery.
Source: The Daily Mail