International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Monday, July 6, 2020

IMF's State of the Global Economy as of July 2, 2020

Last week we released our World Economic Outlook Update for June, which downgraded the April forecast—pegging global growth at -4.9 percent this year, down from -3 percent in April. Next year’s growth is forecast to be 5.4 percent. 

Discussing these figures and more, Managing Director Kristalina Georgieva spoke to Financial Times Africa Editor David Pilling in a new 23-min video interview about the economic uncertainty caused by the coronavirus crisis, how Africa is in danger after a period of growth, and how the IMF is supporting countries through this crisis. For a look at the global outlook for the business community, take some time and watch MD Georgieva's recent 45-min conversation with the Harvard Business Review.

And for a more detailed discussion on how COVID-19 has upended the global economy across the board, watch a new 50-min interview with Chief Economist Gita Gopinath—hosted earlier this week—by the Center for Strategic & International Studies.


Latin America and the Caribbean have become the new COVID-19 global epicenter. The human cost has been tragic, with over 100,000 lives lost. The economic toll has also been steep. Our World Economic Outlook Update now estimates the region to shrink by 9.4 percent in 2020, four percentage points worse than the April projection and the worst recession on record. A mild recovery to +3.7 percent is projected in 2021. 

The rates of COVID-19 infections and deaths per capita are approaching those in Europe and the United States, with the total number of cases accounting for about 25 percent of the worldwide total. Against this backdrop, countries should be very cautious when considering reopening their economies and allow science and data to guide the process. Indeed, many countries in the region have high levels of informality and low preparedness to handle new outbreaks, like a high occupancy of intensive care unit beds and low testing and tracing capacity.

Click here to read the full blog by Director of the Western Hemisphere Department Alejandro Werner, which includes several charts visualizing the impact of COVID-19 on the region and three policy priorities for how best to proceed. There are also specific insights with respect to Argentina, Brazil, Chile, Colombia, Mexico, Peru, Central America, Panama & the Dominican Republic, as well as the Caribbean.


For the first time in living memory, Asia’s growth is expected to contract by 1.6 percent—a downgrade to the April projection of zero growth. While Asia’s economic growth in the first quarter of 2020 was better than projected in the April World Economic Outlook—partly owing to early stabilization of the virus in some—projections for 2020 have been revised down for most of the countries in the region due to weaker global conditions and more protracted containment measures in several emerging economies.

In the absence of a second wave of infections and with unprecedented policy stimulus to support the recovery, growth in Asia is projected to rebound strongly to 6.6 percent in 2021. But even with this fast pickup in economic activity, output losses due to COVID-19 are likely to persist. We project Asia’s economic output in 2022 to be about 5 percent lower compared with the level predicted before the crisis; and this gap will be much larger if we exclude China, where economic activity has already started to rebound.

Our projections for 2021 and beyond assume a strong rebound in private demand; however, this may be optimistic for several reasons: slower growth in trade, longer than expected lockdowns, rising inequality, and both weak balance sheets and geopolitical tensions.

Click here to read the full blog by Director of the Asia and Pacific Department Chang Yong Rhee, which also details key policies that would support the region's recovery.


At the outset, it was expected to be an uphill battle. Vietnam was regarded as highly vulnerable, given its long border and extensive trade with China, densely populated urban areas, and limited healthcare infrastructure. But Vietnam’s cost-effective containment strategy resulted in only 352 confirmed cases and no deaths in a population of almost 100 million people. The country was among the first to lift virtually all domestic containment measures.

Vietnam’s successful strategy was informed by its experience with previous outbreaks, like the Severe Acute Respiratory Syndrome, or SARS, in 2003. Early on, the Prime Minister prioritized health above economic concerns. The strategy was swiftly deployed with the help of the military, public security services, and grass-root organizations, which speaks to some features unique to Vietnam. Effective and transparent communications won the population’s buy-in, and contains broader lessons for developing countries.

Click here to read more in IMF Country Focus. Have your headphones? Listen to a new 14-minute podcast with IMF economists Era Dabla-Norris and Anne-Marie Gulde of the Asia Pacific Department on why Vietnam's approach should allow for a quicker rebound.


In our latest Regional Economic Outlook for sub-Saharan Africa, Real GDP is now forecast to contract by 3.2 percent, double the contraction predicted in April. On average, per capita incomes across the region will fall by 5.5 percent in 2020, back to levels last seen nearly a decade ago. This will likely lead to more poverty and widen income inequality as lockdowns disproportionally affect informal sector workers and small- and medium-sized companies in the services sectors. Regional policies should remain focused on safeguarding public health, supporting people and businesses hardest hit by the crisis, and facilitating the recovery.

For example, shortly after the region’s 100th case on March 15, many country authorities proactively implemented strict containment measures to control the COVID-19 outbreak. These measures led to more people staying home and reducing daily movements to areas with services and recreational facilities, including the informal economy. The growth of new cases has slowed somewhat since, and a number of countries have cautiously eased some of their containment measures. But region-wide, the pandemic is still in its exponential phase with more than a quarter of a million confirmed cases, and infection cases doubling every 2-3 weeks.

Click here to view six charts that tell a visual story of how COVID-19 has impacted sub-Saharan Africa. For more, you can download the reportread the press release and watch the 30-min Q&A press conference.

If you're wondering what impact COVID-19 has had specifically on Africa's energy sector, I would encourage you to read this speech from earlier this week by Director of the African Department Abebe Aemro Selassie to the IEA Africa Ministerial Roundtable.


The Gulf states' economies could contract by 7.6 percent this year in their deepest decline in decades, as COVID-19 and low oil prices take their toll. The new IMF projection for the six-nation Gulf Cooperation Council (GCC) is dramatically worse than the 2.7 percent contraction we forecast just two months ago. Oil revenues in the GCC, which supply nearly a fifth of the world's crude, are also expected to decline by $200 billion in 2020, said Director of the Middle East and Central Asia Department Jihad Azour in a virtual economic forum on the prospects for recovery in the region.

However, Azour predicted a faster rebound in 2021 as Gulf economies grow by 2.5 percent—a full 10 percent turnaround—but that the sharp drop in oil prices and the impact of the pandemic would lead to more debt in GCC economies. Last week, the IMF projected the Saudi economy, the largest in the region, would shrink by 6.8 percent—the lowest growth in more than three decades. A more detailed regional economic outlook will be released in the coming weeks.

If you're wondering about the outlook for Central Asia given the crisis, watch this just-released 15-min interview between Jihad Azour with Lyazzat Shatayeva of Kazakh TV.


The pandemic could be a game changer for digital financial services. Low-income households and small firms can benefit greatly from advances in mobile money, fintech services, and online banking. Financial inclusion as a result of digital financial services can also boost economic growth. While the pandemic is set to increase use of these services, it has also posed challenges for the growth of the industry’s smaller players and highlighted unequal access to digital infrastructure.

Many countries (for example, Liberia, Ghana, Kenya, Kuwait, Myanmar, Paraguay and Portugal) are supporting this shift with measures such as lowering fees and increasing limits on mobile money transactions.

Moreover, in a new study, we introduce a new index of digital financial inclusion that measures the progress in 52 emerging market and developing economies. We found that digitalization increased financial inclusion between 2014 and 2017, even where financial inclusion through traditional banking services was declining. This is likely to have progressed more since then. For more details, click here to read the full blog by the IMF's Ulric Eriksson von Allmen, Purva Khera, Sumiko Ogawa, and Ratna Sahay. 

Still, Internet usage remains a luxury: half of the world’s population does not have access to the Internet, either through a mobile device or through fixed line broadband. Countries in sub-Saharan Africa, followed by many in emerging and developing economies in Asia, are among those with the lowest access to the Internet despite being world leaders in mobile money transactions. There is also a large variation in Internet connectivity by firms in sub-Saharan Africa—only about 60 percent of businesses use email for business compared to about 85 percent in Europe and Central Asia. For more, view our latest Chart of the Week on Internet inequality.


COVID-19 is crippling the economies of rich and poor countries alike. Yet for many low-income and fragile states, the economic shock will be magnified by the loss of remittances, which represent a lifeline that supports households as well as provides much-needed tax revenue. In a new article for F&D, Deputy Managing Director Antoinette Sayeh and Assistant Director in the Institute for Capacity Development Ralph Chami dig deeper into how the pandemic threatens to dry up this vital source of income, and what measures can be taken to tackle this challenge.

As of 2018, remittance flows to low-income and fragile states reached $350 billion, surpassing foreign direct investment, portfolio investment, and foreign aid as the single most important source of income from abroad. A drop in remittance flows is likely to heighten economic, fiscal, and social pressures on governments of these countries already struggling to cope even in normal times. And according to the World Bank, remittance flows are expected to drop by about $100 billion in 2020, which represents roughly a 20 percent drop from their 2019 level. 

Read the full article here with plenty of charts. Prefer the PDF? Click here to download. And if you're in a listening mood, click here for a new 18-min podcast with author Ralph Chami.


We just updated our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19, and we are regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMF’s Executive Board.

To date, 72 countries will have been approved for emergency financing, totaling about US$25.3 billion. Looking for our latest Q&A about the IMF's response to COVID-19? Click here. We are also continually producing a special series of notes—around 50 to date—by IMF experts to help members address the economic effects of COVID-19 on a range of topics including fiscal, legal, statistical, tax and more. The most recent additions include a focus on food markets during COVID-19budgeting in crisis, and digital financial services and the pandemic


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Have a safe weekend,

Rahim Kanani  

Rahim Kanani
Editor, IMF Weekend Read / LinkedIn

P.S. If you're a young person interested in learning more about the IMF, check out our new page dedicated to youth dialogue and engagement. You'll find articles, videos and other resources on climate change, fintech, gender equality and more, as well as economic explainers on issues like social spending and corruption.

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