Pulse on the Global Economy: A brighter economic outlook, but for how long?
The IMF this week upgraded their global growth estimate for 2020 but tighter restrictions on movement across multiple nations at national and regional levels will test the recovery
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The IMF released its World Economic Outlook this week, revising its global growth projections for world GDP from - 4.9% to -4.4%. The revision was led by New Zealand, the US and Brazil, who saw their forecasts rise by 4.7%, 3.7% and 3.3% respectively. The IMF downgraded five forecasts of the 20 economies we show below, including those for India and Hong Kong.
The speed and strength of an economic recovery following a crisis is nearly always underestimated, which inevitably leads to revisions. However, the trajectory of the recovery could be threatened by new restrictions on movement as cases continue to surge.
Across Europe this week, restrictions have been implemented thick and fast. Nine French cities, including Paris, are subject to a 9pm-6am curfew from Saturday. Northern Ireland and The Netherlands imposed new curbs, closing all pubs and restaurants. Northern Ireland is also extending school half-term holidays for two weeks from October 19. The Czech Republic, which has Europe’s highest rate of new cases, has closed schools, bars and clubs for three weeks.
Portugal declared a state of emergency and Spain’s national and regional governments continue to clash over restrictions. A 15-day state of emergency was declared in Madrid after a court overturned a partial lockdown imposed a week ago. Late last Friday, the government banned all non-essential movement in and out of Madrid and nine other cities, despite the opposition of local authorities.
The UK introduced a new three tier system. Liverpool was the first to be named as ‘very high’ with Greater Manchester tipped to be next although local leaders are resisting. London is to be put into Tier 2 from tomorrow, which will restrict mixing of households indoors.
Across the Atlantic and, despite a high rate of new of cases, many areas continue to operate in what is the new normal, potentially adding to a more positive outlook by the IMF. However, parts of New York, notably in Brooklyn and Queens, saw a new colour coded system of restrictions introduced last week which includes shutting all nonessential business and schools in the highest red zones.
There are brighter spots on the horizon with the trans-Tasman travel bubble. Today, Australia will see the first quarantine-free travellers arrive from New Zealanders into NSW and the Northern Territory. The bubble is initially one-way but marks the first opening of its borders.
As we explored last week, the ongoing threat of cases and restrictions was limiting the recovery in the initial months following the lifting of lockdowns. With more stringent measures in place, we could see some metrics reverse and the trajectory bounce back flatten. The back-and-forth between lockdowns, hinders consumer sentiment and the road to recovery, but so do rising case numbers. Governments need to find the balance and support fiscally, something the IMF reiterated this week.