INSIGHTi

Global Economic Growth Forecasts: Impact of
COVID-19
September 1, 2020
Overview
The unprecedented Coronavirus Disease 19 (COVID-19) pandemic and policy responses have
compounded the challenges facing forecasters attempting to estimate the pandemic’s global economic
impact and challenged policymakers to find the appropriate policy response. Some forecasts indicate the
pandemic is negatively affecting economic growth beyond anything experienced in decades. Such
estimates see global economic growth being trimmed by 3.0% to 6.0% in 2020, with a partial recovery in
2021, assuming the current crisis can be mitigated and there is not a second wave of infections. Global
trade could fall by 18%, depending on the depth and extent of the global downturn, exacting an especially
heavy economic toll on developed economies and trade-dependent developing and emerging economies.
At present the global economic recovery seems to be caught between countries experiencing a nascent but
building recovery and those reimposing quarantines and lockdowns in response to resurgence in
diagnosed cases.
Uncertainty about the length and depth of the pandemic’s economic effects have fueled perceptions of
risk and volatility in financial markets and corporate decisionmaking, although intervention by central
banks calmed markets in the second quarter. Policymakers and financial and commodity market
participants generally have been hopeful of a global economic recovery starting in the third quarter of
2020, assuming no second wave of infections, based on continued and unprecedented central bank
support. For some observers, the central bank support has created a disconnect between financial markets
and projected economic prospects. Some forecasts raise the prospects that the pandemic could negatively
affect global economic growth more extensively than previously estimated. In a growing number of cases,
corporations are postponing investment decisions, laying off workers who previously had been
furloughed, and, in some cases, filing for bankruptcy. Uncertainties concerning the effectiveness of public
policies intended to contain COVID-19’s spread are also adding to market volatility.
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Economic Forecasts
As indicated in Table 1, the International Monetary Fund (IMF), the Organization for Economic
Cooperation and Development (OECD), and the World Bank all revised their forecasts downward
between late 2019 and mid-2020, reflecting the rapidly deteriorating state of the global economy. In most
forecasts, advanced economies are projected to experience the steepest declines in economic growth
through the second quarter of 2020. Specifically:
 The IMF lowered its global economic growth forecast between October 2019 and June
2020 from a +3.4% to -4.9%;
 The OECD lowered its forecast from +2.9% in November 2019 to a range of -6.0% to -
7.6% in June 2020, depending on COVID-19’s trajectory;
 The World Bank lowered its forecast of global growth between January 2020 and June
2020 from +2.9% to -5.2%.
On June 10, 2020, the OECD, released an updated forecast that projects global economic growth will
decline by 6.0% to 7.6% in 2020, depending on whether there is a second wave of infections. The
OECD’s double-wave scenario projects a global economic contraction of 7.6% in 2020 and a growth rate
of 2.8% in 2021, delaying a return to full recovery until 2022. These forecasts reflect the OECD’s high
level of uncertainty about the course of the global economy over the remainder of 2020 and its conclusion
that the pandemic is “a global public health crisis without precedent in living memory.” The OECD also
concluded the pandemic is fragmenting the global economy through a growing number of trade and
investment restrictions and diverging national policy approaches.
Labeling the projected decline in global economic activity as the “Great Lockdown,” the IMF released an
updated forecast on June 24, 2020, that concluded the global economy would experience its “worst
recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago.”
(The IMF database indicates that global GDP fell by 0.075% in 2009 during the height of the global
financial crisis.) The IMF estimated global economic output could decline by 4.9% in 2020, before
growing by 5.4% in 2021; global trade is projected to fall in 2020 by 11.9% and oil prices are projected to
fall by 41%.
The June 8 World Bank forecast estimated that 90% of the world’s economies would experience a
recession in 2020, a percentage that is greater than that experienced during the Great Depression. The
World Bank’s baseline estimate indicates that global economic growth could decline by 5.2% in 2020 and
only partially recover in 2021, with a 4.2% rate of growth, assuming that the global economy can begin
recovering in the second half of 2020. Similar to the OECD and the IMF forecasts, the World Bank argues
that the economic impact of the global recession will affect developing and emerging economies that rely
on global trade, tourism, or remittances from abroad, as well as those that depend on commodity exports.
According to a June 23 forecast update, the World Trade Organization (WTO) estimated that global trade
volumes could fall by 18.5% in 2020 and then recover in 2021. This forecast reflects revisions from the
WTO’s April 8, 2020 forecast that global trade volumes could decline between 13% and 32% in 2020, as
a result of the economic impact of COVID-19.
Among major economies, the European Commission forecast in July that the pandemic is one of several
concurrent challenges, including a severe drought that will reduce EU GDP in 2020, with a less vibrant
recovery forecast for 2021. Second quarter data indicate that economic growth in the EU contracted by
11.7% from the first quarter and by 14.1% compared with the same quarter in 2019. Data also indicate
that employment among the EU countries fell by 2.6%, or 5.5 million jobs. Similarly, Japan reported on
August 17 that its economy contracted by 7.8% in the second quarter of 2020, compared with the

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previous quarter, or an annual a rate of decline of 27.8%. India also reported a second quarter drop in
GDP of 23.9%.
Table 1. Major Economic Forecasts, Differing Assessments
Percentage changes at annual rates
World
Advanced economies
Developing economies
United States


2020
2021
2020
2021
2020
2021
2020
2021
International Monetary Fund
October 2019
3.4%
3.6%
1.7%
1.6%
4.6%
4.8%
2.1%
1.7%
April 2020
–3.0
5.8
–6.1
4.5
–1.0
6.6
–5.9
4.7
June 2020
-4.9
5.4
-8.0
4.8
-3.0
5.9
-8.0
4.5
Organization for Economic Cooperation and Development
Nov 2019
2.9
3.0
1.6
1.7
4.0
4.0
2.0
2.0
March 2020
2.4
3.3
0.8
1.2
NA
NA
1.9
2.1
June 2020 single-wave
-6.0
5.2
-7.5
4.8
-4.6
5.6
-7.3
4.1
June 2020 double-wave
-7.6
2.8
-9.3
2.2
-6.1
3.2
-8.5
1.9
World Bank
January 2020
2.5
2.6
1.4
1.5
4.1
4.3
1.8
1.7
June 2020
-5.2
4.2
-7.0
3.9
-2.5
4.6
-6.1
4.0
Source: World Economic Outlook, various issues, International Monetary Fund; OECD Economic Outlook, various issues,
Organization for Economic Cooperation and Development; Global Economic Prospects, various issues, World Bank.


Author Information

James K. Jackson

Specialist in International Trade and Finance




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