The IMF warned that the rebound in global financial-market sentiment "appears disconnected from shifts in underlying economic prospects", raising the possibility that financial conditions will tighten more than forecast in its core scenario.
The IMF said growth even in economies with declining infection rates would be held back by persistent social distancing, "scarring" damage from the lockdown and lower productivity from greater workplace safety measures.
That is 3.7 percentage points more than the 9.1% contraction it predicted in April.
The projection was way below the earlier forecast of a 6.5 percent to 7.5 percent growth for 2020 that was made before the onset of the pandemic.
"These elements, in turn, depend on several uncertain factors, including the length of the pandemic and required lockdowns, voluntary social distancing, which will affect spending, displaced workers' ability to secure employment, possibly in different sectors, scarring from firm closures and unemployed workers exiting the workforce, which may make it more hard for activity to bounce back once the pandemic fades, in addition to the impact of changes to strengthen workplace safety", the report said.
The IMF sees advanced economies shrinking the most, contracting 8 per cent, compared with 6.1 per cent previously.
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Advanced economies have been particularly hard-hit, with USA output now expected to shrink 8.0 per cent and the euro zone 10.2 per cent in 2020, both more than 2 percentage points worse than the April forecast, the International Monetary Fund said.
The body said the COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and recovery is projected "to be more gradual than previously forecasted". In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1.0 per cent in 2020, supported in part by policy stimulus.
Latin American economies, where infections are still rising, saw some of the largest downgrades, with the Brazil economy now expected to shrink 9.1 per cent, Mexico's 10.5 per cent and Argentina's 9.9 per cent in 2020. The IMF does not have the data beyond that year.
The IMF's record reveals that this is the lowest ever for India since 1961.
Global trade volume in goods and services will probably tumble 11.9 per cent this year, the fund said.
Furthermore, the average fiscal response to the pandemic in such economies is now estimated at five percent of GDP, which is sizeable but less than in advanced economies, yet fiscal deficits are projected to widen sharply to 10.5 percent of GDP on average in 2020, more than double the figures in 2019.
It said the synchronized nature of the downturn amplified domestic disruptions around the globe. In that case, output would be 4.9 per cent below the baseline for 2021 and would remain below the baseline in 2022. This decline in growth in 2020 is expected to be followed by a partial recovery, with the growth seen at 5.4 percent in 2021.