The hit to global growth and trade from the coronavirus pandemic will not be as bad as previously feared, although the recovery remains highly fragile, the International Monetary Fund (IMF) and World Trade Organization (WTO) have said.
IMF chief Kristalina Georgieva said the international organisation would make a “small” upgrade to its prediction that the global economy will shrink a record 4.9 per cent this year.
In a separate update, the WTO said global merchandise trade would fall by 9.2 per cent this year. Although still a huge contraction, the new figure was a big improvement on a previous estimate that trade might fall by 13 to 32 per cent.
However, both organisations had warnings about the economy. Speaking at a London School of Economics online event, Georgieva said countries must not “withdraw support prematurely”. She warned that the economic “calamity is far from over”.
The WTO said that trade could slow dramatically “if there is a resurgence of Covid‑19 in the fourth quarter”.
Major economies around the world contracted at a record pace in the second quarter of the year.
Global picked up sharply in the third quarter, with China a particular bright spot. But now rising coronavirus cases and new lockdowns threaten to slow the recovery.
‘Calamity not over’ for global economy
Georgieva said her “key message” was that “the global economy is coming back from the depths of this crisis”.
Yet she added: “This calamity is far from over. All countries are now facing what I would call ‘the long ascent’, a difficult climb that will be long, uneven, and uncertain. And prone to setbacks.”
Addressing governments, she said: “We are very clear in the message we are communicating to not withdraw support prematurely.
The head of the global lender of last resort said: “If we do so, then we risk massive bankruptcies and massive unemployment.”
The WTO said: “Strong trade performance in June and July have brought some signs of optimism for overall trade growth in 2020.” It said trade should grow by 7.2 per cent in 2021.
Yet it said: “These estimates are subject to an unusually high degree of uncertainty since they depend on the evolution of the pandemic.”