SIX MONTHS into the pandemic, short-term forecasts of the global economy are looking slightly less gloomy. But the long-term outlook remains bleak. In its latest World Economic Outlook, published on October 13th, the IMF has revised up its expectations for global growth in 2020, to -4.4% from -4.9% in its previous update in June. However, growth in 2021 is expected to be slightly less buoyant. And the fund warns that the recovery is likely to be “long, uneven, and uncertain”.
The picture still looks much worse than it did in the spring, when the pandemic first peaked across much of the world (see chart). Most large countries are forecast to suffer deep recessions this year, ranging from a contraction of 4% in America to nearly 10% in Britain. That is around twice as deep as the downturns suffered in 2009, in the aftermath of the global financial crisis. Among the biggest economies, only China is expected to actually grow this year—and only by a paltry 1.9%. India, which in April was forecast to grow by 1.9% in 2020, is now expected to shrink by 10.3%.
Just as some patients suffer from long-lasting effects of covid-19, the global economy too will suffer enduring harm. The IMF reckons that, even by 2025, global GDP per person will be lower than had been expected at the start of the year. Poor countries will fall furthest behind. Five years from now, global growth is expected to be 4.7%, nearly a full percentage point lower than the average rate in 2000-19.
The IMF attributes this lasting damage to several factors. The structure of the global economy is likely to shift as a result of the pandemic: consumers’ shopping habits will change; workplaces will need to adapt to social-distancing rules; tourism may not fully revive. Reallocating labour and capital from shrinking industries towards growing ones will take time. High unemployment and a rise in bankruptcies will also have scarring effects, further slowing the recovery. Long covid seems as much an economic problem as a public-health one.