Coronavirus Watch: IMF forecasts too downbeat

The latest IMF global economic forecasts point to a more muted recovery than our own forecasts imply. The fund’s more pessimistic assessment reflects a more downbeat view of growth prospects in advanced economies

The IMF’s weaker US and eurozone forecasts appear to be almost entirely due to a more cautious outlook for growth in Q3. However, given the strength of recent hard data on both economies, we think the near-term growth bounce will be stronger than the IMF expects, suggesting that upward revisions may be needed when flash Q3 GDP estimates are published.

Our forecasts for underlying US and eurozone growth in 2021 are similar to the IMF’s, but we assume less of a reversal of this year’s loose fiscal policy. While we think there’s a good chance that governments will reverse emergency measures even more slowly, the most likely triggers would be bad news on the economy and Covid-19. Looser than expected fiscal policy might not therefore be associated with a stronger recovery.

Topics: Coronavirus