Updates on Global Economy

·         According to IMF forecasts in June 2020, by the end of 2020 world output may be about 8% lower than it would have been without the pandemic. Instead of growing by about 3% it will have shrunk by about 5%—the biggest contraction since the second world war. By comparison, in 2009 the “great recession” shrank the world economy by just 0.1%.

·         In June 2020, the IMF forecast that the overall gross public-debt-to-GDP ratio of advanced economies would rise from 105% in 2019 to 132% by 2021.

·         The IMF’s latest forecasts, released on October 13th, spell out just how long the economic harm from covid-19 will last. America’s GDP will return to its 2019 level only in 2022; Italy’s, in 2025. The fund reckons that in many places output will stay well below its pre-pandemic trend, as labour and capital are only slowly reallocated from shrinking industries towards thriving ones.

·         In last October 2019,  the IMF expected India’s economy to grow by more than 40% by 2024; now it expects half that. The GDP growth computed by IMF is for period  2019 to 2024 and is based on cumulative percentage increase.

·         According to the IMF, public debt in poor countries rose from 29% of GDP in 2012 to 43% in 2019 and is expected to jump to 49% this year.

·         On October 2020, 14th finance ministers of the G20 group of countries offered a temporary salve for 73 of the world’s neediest countries, by saying they would extend their Debt Service Suspension Initiative (DSSI) to halt debt-service payments until July 2021. The objective is to free up funds to fight the pandemic. DSSI offers a temporary suspension of "official sector" or government-to-government debt payments. The proposed extension will see it run until June next year. The payments covered are not forgiven but delayed, with a repayment period of three years and a one-year grace period.

Notes:

* The debt-to-GDP ratio is the ratio between a country's government debt (measured in units of currency) and its gross domestic product (GDP) (measured in units of currency per year). A low debt-to-GDP ratio indicates an economy that produces and sells goods and services sufficient to pay back debts without incurring further debt

*Cumulative percentages add a percentage from one period to the percentage of another period. This calculation is important in statistics because it shows how the percentages add together over a time period.

* The public debt is how much a country owes to lenders outside of itself. These can include individuals, businesses, and even other governments.

*Debt service is the cash that is required to cover the repayment of interest and principal on a debt for a particular period.

* According to IMF, GDP measures the monetary value of final goods and services—that are bought by the final user—produced in a country in a given period of time.