IMF: Further policy measures will be needed to contain economic damage from virus

The coronavirus outbreak hit the global consumption deeper than expected, the International Monetary Fund (IMF) noted in its updated World Economic Outlook forecast on Wednesday. The IMF now expects the global output to contract by 4.9% in 2020 (-3% in April forecast).

Additional takeaways

“Advanced economies to take a deep hit, with 2020 US output now contracting 8.0%, euro area contracting 10.2%.”

“China is only major economy expected to maintain positive growth in 2020 at 1.0% vs 1.2% in April forecast.”

“Second outbreak in 2021 could cut global growth recovery for that year to about 0.5%.”

“Prolonged decline in activity due to virus could lead to further scarring from business failures, tipping some countries into debt crises.”

“2021 growth rebound to be weaker due to extended uncertainty, at +5.4% vs +5.8% forecast in April.”

“Further policy measures will be needed to contain economic damage from the virus, set the stage for the return to growth.”

“Development of effective vaccine could lift growth, even before it is widely distributed.”

“Brazil output to shrink 9.1% in 2020 vs 5.3% contraction in April forecast; Mexico output to contract 10.5%.”

Market reaction

The market sentiment remains sour following this report. As of writing, major European equity indexes were losing between 1.6% and 1.85.