I.M.F. Predicts Deeper Global Downturn Even as Economies Reopen

The prediction of a gradual and halting recovery is less sanguine than what Trump administration officials have been forecasting. Treasury Secretary Steven Mnuchin said on Tuesday that he anticipated a “spectacular rebound” in the second half of the year, and Larry Kudlow, the director of the National Economic Council, said he expected a V-shaped recovery, meaning a sharp, steady economic uptick on the heels of recession.

But the report notes that, even in countries where infection rates are declining, major obstacles to a resumption of normal activity persist. Travel and mobility remain depressed, and the virus has dealt a blow to consumption and business investment.

“In most recessions, consumers dig into their savings or rely on social safety nets and family support to smooth spending, and consumption is affected relatively less than investment,” the I.M.F. said. “But this time, consumption and services output have also dropped markedly.”

The pandemic has also curtailed the flow of global trade, which the fund estimated had contracted 3.5 percent in the first quarter from a year earlier.

That is in line with an estimate by the World Trade Organization, which said Tuesday that global trade had fallen sharply in the first half of the year. On the brighter side, that trajectory did not seem quite as bad as the group had previously projected.

Article source: https://www.nytimes.com/2020/06/24/business/imf-world-economic-outlook.html