Few countries in the world have been spared from the devastating economic consequences of the coronavirus outbreak. But no economy will have a bigger impact on global growth than the U.S.
The leader in confirmed Covid-19 cases, the U.S. is expected to account for 31% of this year’s decline in worldwide gross domestic product, according to Bloomberg calculations using International Monetary Fund data. That’s more than twice the country’s share of global output. Overall, the IMF forecasts the global economy will contract 3%, the most in almost a century, before soaring almost 6% in 2021.
“Although essential to contain the virus, lockdowns and restrictions on mobility are extracting a sizable toll on economic activity. Adverse confidence effects are likely to further weigh on economic prospects,” the IMF said in its World Economic Outlook report, released this week.
Germany and Japan will account for the second and third highest shares of the decline, at more than 7% each.
The U.S. economy has been devastated by the pandemic. More than 667,000 cases of Covid-19 have been confirmed, while over 32,800 have died. Italy has the second highest totals, with about 169,000 cases and 22,000 deaths.
Economic data suggest the worst is yet to come. U.S. retail sales and factory output posted historic declines in March, and almost every state now has stay-at-home orders. JPMorgan Chase & Co. said in a note it expects gross domestic product will fall by 40% in the second quarter from a year ago.
For the full year, the IMF predicts GDP will contract by 5.9% in the U.S., 9.1% in Italy, 7% in Germany and 5.2% in Japan. These dismal results will be offset somewhat by growth in China and India, two of the biggest economies.
In January, before the coronavirus began spreading widely, the IMF estimated 3.3% global growth this year and 3.4% in 2021. The 2020 number was down slightly from a 3.4% projection in October because of “negative surprises to economic activity in a few emerging market economies” and the impact of increased social unrest, the IMF said.
For 2021, the fund sees a substantial recovery, with the global economy expanding by 5.8% -- the most in IMF records going back to 1980. China will lead the way, contributing a 29.2% share, with the U.S. in second place at 12.8%. India, Indonesia and Germany round out the top five.
“Despite delays in disbursing fiscal support, the Fed’s heroic efforts will ensure financial markets function properly and have sufficient liquidity for the economy’s rebound on the other side of this health crisis,” Bill Lee, chief economist at the Milken Institute, said about the Federal Reserve.
The IMF estimates China will grow by 9.2% next year, compared with 1.2% in 2020. The U.S. will rally to a 4.7% increase, the strongest since 1999.
Growth is expected to be widespread and robust but “the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion dollars, greater than the economies of Japan and Germany, combined,” IMF Chief Economist Gita Gopinath said in a blog post.
Some caution the fund’s outlook is too rosy.
“The 2021 projections are wildly optimistic given that the bottom of the economic recession has not been reached in many major economies,” said Ehtisham Ahmad, a former IMF senior adviser and division chief.
Thomas Torgerson, co-head of sovereign ratings at DBRS Morningstar, voiced a similar concern: “The coronavirus pandemic and the associated response has generated tremendous uncertainty for economic forecasting and for credit risk analysis.”
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