When coronavirus spread beyond Wuhan, economies crashed in unison. Around the world, output sank at a scale not witnessed in peacetime. Since then an aggressive fiscal and monetary response — and successful containment of the virus in several east Asian economies, including China — has meant that the prognosis now is no longer as bleak as some had feared earlier in the year. The IMF said in its World Economic Outlook, which was released on Tuesday, that the global economy will shrink by 4.4 per cent this year — an awful figure, but not quite as bad as the 5.2 per cent decline forecast in June. The prospects of recovery, however, are far from even.
Of the world’s largest economies, China, buoyed by strong export sales and a reduction in caseloads that has enabled an economic reopening, is set to grow by 1.9 per cent this year — a far more optimistic result than expected. The US and European economies, meanwhile, are still set to experience sharp contractions as a result of not being able to fully remove restrictions on movement.
There are marked differences within the world’s two largest economic blocs. The US, where the Federal Reserve and the Treasury acted swiftly to shore up financial and labour markets, will perform much better than Europe. Its economy is seen as shrinking by 4.3 per cent, compared with a deeper contraction of 8.3 per cent in the eurozone. The UK economy, meanwhile, is forecast to shrink by 9.8 per cent — a slight improvement on what the IMF expected in June.