Europe, LatAm to lead 2020 emerging economies' downturn; Asia to limit damage, IMF says

NEW YORK (Reuters) – Emerging and developing economies are likely to contract about 1% this year as the coronavirus pandemic disrupts economic activity across the world, the International Monetary Fund said on Tuesday, with Asia ticking up to slightly offset the sharp declines expected in emerging Europe and Latin America.

In its 2020 World Economic Outlook, the IMF slashed growth expectation for the region in 2020 to -1% from an estimate of over 4% growth just three months ago. China and India are forecast to grow more than 1% each; Russia, Mexico and Brazil are expected to shrink more than 5%.

“Growth would be even lower if more stringent containment measures are necessitated by a wider spread of the virus among these countries,” the IMF said of the region.

Nearly 2 million people are confirmed infected globally in the coronavirus pandemic and about 120,000 have died. Cities across the globe have shrunk economic activity to a minimum in an effort to curtail the infection.

The IMF’s forecasts assume that outbreaks of the novel coronavirus will peak in most countries during the second quarter and fade in the second half of the year, with business closures and other containment measures gradually unwound.

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In China, where business activity is slowly resuming, the economy is expected to grow at a 1.2% rate in 2020, down from 6% growth in the IMF’s January forecast. The world’s second-largest economy is forecast to grow 9.2% in 2021.

In Latin America, where outbreaks have continued to rise, the economy is likely to contract 5.2%. Argentina is expected to join Brazil with a contraction of over 5% in 2020. Mexico’s projected 6.6% decline would be the largest among the Western Hemisphere’s biggest economies, Venezuela not included.

Saudi Arabia is expected to contract 2.3%, Nigeria 3.4% and South Africa 5.8%.

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In its report, the IMF said the global economy is likely to shrink by 3.0% in 2020, the steepest downturn since the Great Depression of the 1930s. A rebound to 5.8% growth is expected next year.

“Even after the severe downgrade to global growth, risks to the outlook are on the downside,” said the Fund, not just because the pandemic could last longer than expected but also because “the effects of the health crisis on economic activity and financial markets could turn out to be stronger and longer lasting.”

In its base case, the Fund sees emerging and developing economies returning to growth in 2021 at a 6.6% rate.

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