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The IMF in Washington, DC.

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The International Monetary Fund’s (IMF) has projected that T&T’s economy will contract by 4.5 per cent for 2020.

The IMF’s projections for T&T come as the country and the rest of the world grapple with the fallout from the COVID-19 pandemic. However, the IMF’s data indicated that the country is expected to rebound in 2021 with growth projected at 2.6 per cent.

Previously the IMF projected the T&T economy would grow by 1.5 per cent in 2020 and for the years 2021 to 2024, the forecasted growth was at 2.3 per cent, two per cent, 1.6 per cent and 1.7 per cent respectively.

However, the IMF’s new projections do not show a revised forecasts for the years 2022 to 2024.

Meanwhile, the growth projections for Latin America and Caribbean has dramatically decreased as well. The IMF recently released Chapter 1 of its World Economic Outlook Report entitled “The Great Lockdown”, which indicated that the region would contract by minus 5.2 per cent for 2020.

This differs from the previous January projection of 1.6 per cent growth for 2020. For 2021, the IMF project a 3.4 per cent growth, a 1.1 increase over the January projections.

The IMF Economic Counsellor Gita Gopinath noted that It is very likely that this year the global economy will experience its worst recession since the Great Depression (1929), surpassing that seen during the global financial crisis of 2008.

She said: “The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”

Gopinath indicated that a partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound.

She articulated that much worse growth outcomes are possible and may even be likely. Gopinath indicated that these outcomes would follow if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment.

Gopinath noted that the economic shock of the current crisis is large and the output loss associated with this health emergency and related containment measures likely dwarfs the losses that triggered the global financial crisis.

According to Gopinath: “In normal crises, policy-makers try to encourage economic activity by stimulating aggregate demand as quickly as possible.”

She continued: “This time, the crisis is to a large extent the consequence of needed containment measures. This makes stimulating activity more challenging and, at least for the most affected sectors, undesirable.”

Gopinath noted that the forecast for the global economy laid out in its report reflects the institution’s current understanding of the path of the pandemic and the public health measures required to slow the spread of the virus, protect lives, and allow health care systems to cope.

Nevertheless, she acknowledges that there remains considerable uncertainty around the forecast, the pandemic itself, its macroeconomic fallout, and the associated stresses in financial and commodity markets.