In its Semi-Annual World Economic Outlook, the International Monetary Fund (IMF) indicated this week that a prior forecast of severe global economic impact caused by the coronavirus pandemic will not be as worse as first believed.
That stated, the compelling headline of this week’s updated IMF global economic forecast is that China is forecasted to be the only major economy to experience positive growth in 2020.
Other reasons noted for the slightly improved economic outlook, albeit still negative for the year 2020, was better than expected performance among advanced economies in Q2, and signs of more rapid recovery during Q3. The agency indicated that outcomes would have been: “much weaker if it weren’t for sizeable, swift and unprecedented fiscal, monetary, and regulatory responses.”
The latest forecast calls for a 4.4 percent decline in global GDP growth as compared to the 5.2 decline that was indicated in June. The IMF Chief Economist Gita Gopinath noted this week; “While the global economy is coming back, the ascent will likely be long, uneven, and uncertain.”
Indications from the IMF are that among advanced economies, the ascent to pre-pandemic economic growth levels will likely will not be large enough to recover the damage incurred this year.
China, the globe’s second largest economy is now forecasted to grow 1.9 percent this year, compared to a consistent growth rate in the area of 6 percent in prior years. The IMF now expects China’s GDP growth to be 8.2 percent in 2021, a considerable growth bounce back. Bloomberg reported that based on this latest China forecast, the proportion for worldwide growth stemming from this country is expected to be 26.8 percent by the year 2021, and 27.7 percent in the year 2025.
For the United States, the IMF forecasts a 4.3 percent GDP decline in 2020, followed by a growth rate of 3.1 percent in 2021. For the Eurozone sector, a significant 8.3 percent GDP decline this year is forecasted as growth of 5.2 percent next year. Japan’s GDP is forecasted to decline 5.3 percent, followed by 2.3 percent growth next year.
Some Reader Takeaways
Multi-industry supply chain management executives and strategists obviously need to take heed to both the IMF’s latest forecasts and warnings in their plans for the year 2021, and perhaps beyond. Overall, the IMF’s latest delivered message is that it will likely take several years for most countries to achieve full recovery, and that likely needs to be considered in assessing product demand levels by global region.
A further takeaway came from reporting by Bloomberg indicating that the five nations that have incurred the highest COVID-19 deaths (United States, Brazil, India, Mexico, United Kingdom) are by the IMF numbers, to suffer a total GDP decline of nearly $1.8 trillion nominally. Clearly, that is a message that control measures for stemming or mitigating increased virus infection, and the performance of vaccine global supply and logistics delivery over the coming months looms as critical.
From our Supply Chain Matters lens, the forecast data related to China tends to mute whether the increased trade and tariff conflicts concerning the U.S. is having significant economic impact to China’s economy, especially next year.
As we have pointed out in our recent blogs and Q3 Newsletter commentaries regarding the current level of global wide production and supply network activity, the ongoing “V” shaped output response is likely an indication of multi-industry supply chain management response to the pandemic’s immediate impacts. Predicting where this momentum heads will indeed be challenging and likely the discussion of many sales and operations team and C-Suite discussions in the months to come.
Uncertainty, agility and resiliency remain the sign posts for quite some time.
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