RIO DE JANEIRO, BRAZIL – The Washington D.C. based Institute of International Finance (IIF) has lowered its global Gross Domestic Product (GDP) projection and forecast a 2.8 percent contraction in 2020, meaning that “the shock caused by Covid-19 will be sharper than during the 2008 financial crisis.
In a report released on Thursday, April 9th, the institution also estimated that the Brazilian economy, “not having fully recovered from the 2015 recession,” will contract 4.1 percent this year.
According to the document, China’s growth should decelerate 2.1 percent in 2020.
The Institute also estimates sharp retractions in economic activity in the United States (-3.8 percent), Japan (-4.2 percent) and the euro zone (-5.7 percent) this year. “Our forecast assumes that there will be stabilization and partial recovery in the second half of the year, a premise that is subject to risks”, he stresses.
According to the IIF, emerging economies will be the most affected by the recession, with GDP in Latin America dropping five percent this year.
The institution explains that these countries have registered a record capital flight in the first quarter, exceeding the peak of the 2008 crisis. “A combination of the Covid-19 shock and a substantial drop in oil prices, after the failure of negotiations by the Organization of Petroleum Exporting Countries and Allies (OPEC+), caused a US$83 billion capital outflow in March alone,” it points out.
The Institute notes that in the midst of the crisis, the Federal Reserve took a number of measures to support the liquidity of emerging markets, including the implementation of foreign exchange swap lines with other CBs.
“However, in some cases, the Covid-19 shock, combined with pre-existing challenges, will require additional actions,” says the