The IMF projects that global GDP will decline by nearly 5% this year

The IMF believes that the social gap policy because of Covid-19 will cause US GDP to decrease by 8% and China to grow only 1% in 2020.

In the recently released World Economic Outlook Update, the International Monetary Fund (IMF) continues to lower its global growth forecast. This year, global GDP could drop by 4.9% - stronger than the rate in its April report (-3%).

"Covid-19 had a negative impact on economic activity in the first half of 2020 with a stronger level than expected. Therefore, the recovery momentum may be slower," the IMF explained. The agency also lowered its GDP forecast next year, from 5.8% growth to 5.4%.

The IMF said the reduction in adjustment due to social gap measures could still last for the second half of the year, affecting productivity and supply chains. In countries with high rates of infection, economic activity will decline further.

The labor market therefore also suffered strong blow. The IMF estimates the number of hours reduced in the second quarter equals more than 300 million full-time jobs lost globally. The low-class working class is greatly affected by the inability to work remotely.

The US - the largest economy in the world - is forecasted to reduce GDP by 8% this year. This is stronger than the April forecast of -5.9%. Eurozone also lowered its growth forecast to -10.2%. Meanwhile, China's GDP is expected to increase by 1%.

The IMF also warned that public finances will be seriously degraded as governments try to defuse losses from Covid-19. So far, countries have borrowed more and launched a series of huge fiscal stimulus packages.

According to IMF forecasts, global public debt will set new records in 2020 and 2021, with 101.5% of GDP and 103.2% of GDP. The average fiscal deficit also soared to 13.9% of GDP this year.

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