World Economic Outlook Update - June 2020

The International Monetary Fund (IMF) revised downwards the real GDP growth forecasts published in the April 2020 World Economic Outlook (WEO), highlighting how the effects of the economic and health crisis are causing a greater contraction in economic activity than previously assumed, and forecasting a more gradual recovery during 2021.

According to the new estimates, the world economy is expected to experience a contraction in economic growth of -4.9% in 2020, 1.9 percentage points lower than assumed in the April scenario, with a subsequent recovery in 2021, with an expected growth of 5.4%. The graph below provides an interactive map of the growth of the main economies in 2020, as estimated in the latest WEO update.

Growth forecasts 2020 for the main countries
(GDP changes at constant prices)

As shown in the map, the Eurozone economy is expected to contract most significantly, with a decline of 10.7% in 2020. The review covered several member countries, including Spain, Italy and France with the worst performance.
Projections for the American economy are also worsening, with a drop of 8% in 2020 compared to -5.9% in the April scenario.

The growth prospects of several emerging economies have also declined sharply, due to the rapid intensification of the pandemic in several markets. The Indian economy, due to tighter lockdown policies, is expected to decline by -4.5%, 6.4 points below the April scenario. The growth projections for the economies of Latin America, in particular Mexico and Brazil, also sharply worsened.

Particularly noteworthy, the downward revision of the growth prospects of Saudi Arabia, which suffers from a double shock mechanism linked to oil price changes, as well as the direct effects of the pandemic.

Among the few geographical areas growing in 2020 is China, whose economy is expected to achieve a modest +1% by the end of the year, before returning to growth at 8.2% in 2021.

Several elements are behind the downward revision of IMF estimates

At the basis of the worsening international outlook, there are several factors. First, the strong spreading of the epidemic in emerging economies has necessitated longer period of lockdown and increased uncertainty about the evolution of the epidemic in these areas, due to the limited number of tests carried out. Moreover, in economies with declining infection rates, the recovery path is expected to be slower and more gradual, reflecting the sharp deterioration in confidence of consumers and businesses and the negative impact on productivity of businesses' compliance with occupational safety and hygiene standards.

It should be stressed, however, that, like the other forecasts, the new data assume an unusual degree of uncertainty, reflecting the assumptions of the baseline forecast scenario. For further details on this topic, please refer to the article Monthly International Trade statistics: April 2020.