The International Monetary Fund (IMF) has sounded a new warning about the global economy.
In a new report, the IMF has warned that the world economic recovery is fading as the resurgence of Covid-19 forces fresh restrictions to be imposed on households and businesses.
The IMF sounded the alert as leaders of the Group of 20 countries prepare for a virtual summit this weekend, hosted by Saudi Arabia. It noted progress on a vaccine, but also said elevated asset prices point to a disconnect from the real economy and a potential threat to financial stability.
“While global economic activity has picked up since June, there are signs that the recovery may be losing momentum, and the crisis is likely to leave deep, unequal scars,” said the Washington, D.C.-based fund in its latest report. “Uncertainty and risks are exceptionally high.”
The United Kingdom, Germany and France as well as parts of the U.S. and Australia are among the countries with new curbs on movement and businesses to contain the pandemic’s spread. They’re not as stringent as the lockdowns imposed earlier this year but are still enough to damage global economic growth, said the IMF.
The IMF is urging governments and central banks not to prematurely withdraw policy support. The Federal Reserve and European Central Bank are debating further stimulus as soon as next month even amid mounting confidence that a vaccine for the virus is coming soon.
Last month, the IMF warned that the world economy still faces an uneven recovery until the virus is tamed. At the time, it cut its prediction for the slump this year to 4.4% from the 5.2% drop seen in June, though that would still be the deepest contraction since the 1930s.
