International Monetary Fund June 11 2020 The Global
International Monetary Fund June 11, 2020 The Global Outlook Gian Maria Milesi-Ferretti Deputy Director, Research Department
A Roadmap – Where we started – What has changed since then? • • • 2020 Q 1 GDP releases (in the aggregate: weaker than the April 2020 WEO forecast) Higher-frequency indicators for Q 2: PMIs, mobility indices, electricity consumption etc Economic policy decisions Dynamics of the pandemic within and across countries Pattern of lockdowns and re-openings – • • Sources of uncertainty (pandemic) Evolution of virus Likelihood of a second wave in countries that reduced infections Effectiveness of tools to deal with recurrence/second wave (tracing, tracking, testing) Control of pandemic in countries with rising infections Regional differences Vaccine development and timing of diffusion Therapeutics – • • Sources of uncertainty (economics) Extent of damage from the downturn (bankruptcies, permanent layoffs) Scarring Persistence of hit to demand from social distancing Need for and cost of resource reallocation across sectors Productivity hit from safety measures Shock to global trade and its macro implications Non-linearities (debt / external / currency crises) 10
April WEO projections Quarterly world GDP (2019: Q 1 = 100; dashed lines indicate estimates from January 2020 WEO Update) Advanced Economies Emerging Market and Developing Economies, excluding China 125 115 105 95 85 2019 Q 1 2019 Q 3 2020 Q 1 2020 Q 3 2021 Q 1 2021 Q 3 Sources: IMF WEO April 2020. 1
Trade growth has dropped sharply Imports Exports (percent yoy) GPM World Other AEs Asia excl Chn and Japan USA 7 6 Other EMs Latam Euro area China GPM World Other AEs Asia excl Chn and Japan USA 7 6 5 Other EMs Latam Euro area China 5 4 4 3 3 2 2 1 1 0 0 -1 -2 -1 -3 -2 -4 -3 U Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 2016 2017 2018 2019 2020 Sources: IMF, World Economic Outlook; Haver Analytics; and IMF staff calculations. 6
The pandemic path: Cumulative confirmed cases AE: Cumulative confirmed cases EMDE: Cumulative confirmed cases (log scale; Last update: June 11) Cases double …every 2 days every day… USA …every 3 days 1000000 …every week …every 3 days BRA 1000000 RUS ESP ITA DEU 100000 CHN EGY JPN 10000 KOR IND PER IRN TUR 100000 …every week IDN 10000 THA 1000 VNM 100 0 10 20 30 40 50 Days since 100 th confirmed case → 60 70 80 90 100 Source: European Centre for Disease Prevention and Control. 2
The pandemic path: New confirmed cases AE: New confirmed cases EMDE: New confirmed cases (log scale; Last update: June 11) 1000000 BRA 100000 10000 ESP DEU 1000 ITA JPN 100 KOR New cases (previous 7 days) USA 10000 EGY IDN 1000 100 CHN VNM 10 100000 1000000 Total confirmed cases RUS IND PER IRN TUR 100000 10 1000 THA 1000000 Total confirmed cases Source: European Centre for Disease Prevention and Control. 2
Industrial production and retail sales plummeted in April Industrial Production - Manufacturing Retail sales (index; December 2019 = 100) (Volume index, December 2019 = 100) 120 110 100 90 100 USA Japan Germany France 70 Italy Spain 60 Korea Thailand Brazil Mexico 80 50 Dec-2019 Jan-2020 Feb-2020 90 80 70 Mar-2020 Apr-2020 USA Japan UK Germany France Italy Spain Korea Indonesia Russia 60 Dec-2019 Jan-2020 Feb-2020 Mar-2020 Apr-2020
PMIs: extreme weakness at the start of Q 2…but some recovery in May PMI: Manufacturing - output PMI: Services - business activity CHN USA RUS May DEU GBR ITA ESP April GLOBAL Sources: IMF, World Economic Outlook; IMF, Global Data Source; and Haver Analytics. AUS GLOBAL CHN ITA 0 AUS 0 FRA 10 EUA 10 GBR 20 USA 20 ESP 30 RUS 30 DEU 40 JPN 40 BRA 50 IND 50 March FRA 60 BRA May JPN 60 April IND March (index; >50 = expansion; sa) EUA (index; >50 = expansion; sa) 7
China has seen recovery in activity China: Real retail sales China: Industrial production and fixed asset investment (y/y percent change, SA) Catering services (y/y percent change) Goods 10 10 IP Fixed asset investment 5 5 0 -10 -5 -15 -20 -10 -25 -15 19 -Dec 20 -Jan 20 -Feb 20 -Mar 20 -Apr -30 19 -Dec 20 -Jan Sources: Haver Analytics; and IMF staff calculations. Note: Specific initial shock dates by event are: COVID-19 = Coronavirus Disease 2019 (2020 Q 1) and GFC = Global Financial Crisis (2008 Q 4). 20 -Feb 20 -Mar 20 -Apr 9
Consumer price inflation has fallen Consumer price inflation (percent yoy, solid=headline, dotted=core) 6 Advanced economies Emerging markets 5 5. 1 4 2. 8 3 2. 1 2 1 0. 3 0 May-19 Jul-19 Sources: IMF WEO April 2020. Sep-19 Nov-19 Jan-20 Mar-20 May-20 5
Reopening has gradually started in many parts of the world Oxford Stringency index (index, ppp gdp weighted average) 100 AFR 90 APD ex China EUR MCD WHD 80 70 60 50 40 30 20 10 0 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Sources: Hale, Thomas, Sam Webster, Anna Petherick, Toby Phillips, and Beatriz Kira (2020). Oxford COVID-19 Government Response Tracker, Blavatnik School of Government; and IMF staff calculations. 8
Considerations for the forecast – Size of lockdown effect • How does the pandemic and lockdown interact with structure of the economy (share of employment and output accounted for by contact-intensive sectors)? – Persistence of social distancing • How long will fear of contagion and voluntary social distancing linger after lockdowns are lifted? • – Risk of recurrence / second wave Possibility of stop-start containment measures, prolonged uncertainty for firms and households – Extent of scarring / shocks to productivity • To what extent will furloughs and reduced work hours translate into job losses going forward? • How much structural reallocation of workers will need to take place if distancing lingers? • Will attrition of skills, sectoral and geographical mismatches between vacancies and unemployed workers lower the probability of being rehired quickly? • Productivity effects from additional safety / distancing measures? • Bankruptcies, balance sheet effects, debt overhangs – Policy support • How will it evolve during the recovery phase? 10
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