Uncertain but Diminishing Recovery
In April, the IMF projected global GDP to be -3.0% and the US at -5.9%. Today, the IMF announces an Uncertain Recovery and a Crisis Like No Other.
Global growth is projected at –4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.
Quarterly World GDP
Get used to downgrades. The IMF is perennially optimistic.
In this case especially China.
Nonetheless, this is a huge downgrade. Global GDP for the year 2021 as a whole is
forecast to just exceed its 2019 level.
Uncertainty
The IMF says there is pervasive uncertainty around this forecast like April.
For the first time in history, all regions are projected to experience negative growth in 2020.
It seems like the certainty we have is increasingly negative.
Upside Risks
- Vaccine
- Other medical breakthroughs
Downside Risks
- Bigger outbreaks
- More quarantines
- Firm closures
- Hiring
- Bankruptcies
- Tighter financial conditions
- Trade tension between the US, China, EU
- Opec
- Weak demand
- High debt levels
IMF’s Key Assumption
Countries will not reinstate stringent lockdowns of the kind seen in the first half of the year, instead relying on alternative methods if needed to contain transmission (for instance, ramped-up testing, contact tracing, and isolation).
Bear in mind that the revised forecast to the downside included that key assumption.
Message for Trump
All countries—including those that have seemingly passed peaks in infections—should ensure that their health care systems are adequately resourced. The international community must vastly step up its support of national initiatives, including through financial assistance to countries with limited health care capacity and channeling of funding for vaccine production as trials advance, so that adequate, affordable doses are quickly available to all countries. Where lockdowns are required, economic policy should continue to cushion household income losses with sizable, well-targeted measures as well as provide support to firms suffering the consequences of mandated restrictions on activity. Where economies are reopening, targeted support should be gradually unwound as the recovery gets underway, and policies should provide stimulus to lift demand and ease and incentivize the reallocation of resources away from sectors likely to emerge persistently smaller after the pandemic.
That message was to “all countries” but one has to wonder if it was pointed at the US.
Houston Will Exceed ICU Capacity by Tomorrow
Note that Houston Will Exceed ICU Capacity by Tomorrow.
Fake News of the Day
In the fake news of the day Trump says States are Testing Too Much.
No medical experts of any merit, including his own staff would agree.
Yet, Trump just cut funds for more testing in five states. See the above link for details.
Mish
And how accurate has the IMF been in the past?? Not very. Usually the opposite comes true.
“Tighter financial conditions”
…
Yes. We haven’t seen the tsunami of defaults / delinquencies yet (thank you stimulus / forbearance / change under the seat cushion) … but it WILL come. And when it does … All She Wrote re economy …
Our government will save the rich – to hell with the poor. They don’t know any better. I say let those corporations that were fiscally irresponsible die once and for all. Survival of the fittest. Main Street will also suffer horribly in the short term but we need a reset of the US economy. Keeping zombie corporations alive mostly benefits the wealthy both directly and indirectly. Laissez faire.
Time for another massive stimulus bill. Only question is where will the goodies be distributed. If I was a betting man I would bet Wall Street more than Main Street.
tRump may bully the whole world, but the coronavirus laughs back at him
Some want to believe the spike in cases is just a result of increased testing. It seems far more likely it is a result of failed leadership and population stupidity. For some strange reason this virus just doesn’t respond well to wishing and hoping…
The spike is due to summer heat and people remaining indoors, breathing recirculated, air-conditioned air. Notice the “spike” is most obvious in AZ, TX and FL. What might these places have in common in late June? DUH!!!!
Remaining indoors breathing recirculated, air-conditioned air is not such a problem unless you are doing so in public places with crowds of people without everyone following all the suggested precautions for such interactions.
It can be both. If all three of these are true:
then, you know that it isn’t Covid spreading faster; it is that you are testing enough to find more and more cases. If any of the above are not true, then more testing is not the only reason for the increased number of cases. In Texas, the hospital usage keeps rising, so testing is not the problem.
U.S. hits highest single day of new coronavirus cases with more than 45,500, breaking April record
I wonder where CNBC gets their numbers? Worldometers reports 38,386 cases yesterday, which is less than the April 24 peak of 39,072, and certainly not 9,000 more.
Note, by the way, that cases are falling in every state which requires masks in public. My state doesn’t require masks, but people are strongly urged to “do the right thing” and wear masks.
So the only economy in the world that will remain positive for the year is the same country that the virus came from. Nothing at all suspicious about that.
You mean Fort Detrick, right? Large number of people were diagnosed last summer as caused by electrical piping, then disappeared suddenly
Hate to say it but we are only in the early innings of this outbreak. And anyone who believes that we will have an effective vaccine soon is in fantasy land. We need effective state government responses coordinated at the federal level. And the chances of that happening with the clown we have in the White House is zero. Need to throw him in the big house for corruption and war crimes.
Signs of the times–CNBC headlines now
White House considers shakeup at CDC over botched Covid-19 response, report says
Dow plunges 700 points [Wednesday] as Florida sees record jump in coronavirus cases
Trump family asks court to block tell-all book by president’s niece Mary
McDonald’s will keep dozens of items off the menu for the foreseeable future
Cramer rails against wealthy money managers for scaring investors out of market with bubble talk
Stock market live Tuesday: Rally into the close, Dow gains 526, economy roaring back
This worked well before, right?….The Trump administration is considering new tariffs on $3.1 billion exports from France, Germany, Spain and the U.K., according to a notice from the U.S. Trade Representative released Tuesday evening. The new duties on olives, beer, gin and trucks can be up to 100%…..
Dow 800K then?
great take, mish. you do fine work. thanks.
I have never seen or read of such a contra-expert policy in HISTORY, much less in my lifetime. Should Trump ever regain his senses he should have incredible crocodile tears. But the nefarious nut job couldn’t admit even the slightest errors. CRAZY!