Daily Commentary BY THE CURVE TEAM –

IMF Downgrade Global Outlook

25th June 2020

In a paper aptly titled “A Crisis Like No Other, An Uncertain Recovery”, the International Monetary Fund (IMF) flags significant headwinds for the global outlook.

In an extension on their April forecast, the IMF further downgraded their global outlook in their June release, projecting global growth for 2020 at -4.9%. Interestingly, they currently predict a bounce in 2021 of 5.4% but that would still leave the global economy 6.5% lower by the end of 2021 than their pre-Covid January forecast.

Similar to recent RBA documents, the IMF include both upside and downside scenarios to their forecast. They forecast that if we see an elongated spread or second wave of the virus into 2021 then GDP for that year would also fall by 4.9%. In the upside scenario where the virus is quickly contained, an uplift of half a percent is forecast.

Recent data on the virus continuing to spread in the US and developing countries suggests the upside scenario is unlikely to eventuate without a vaccine.

Yesterday, we also saw the quarterly release of the Council of Financial Regulators. The scheduled meeting of the RBA, APRA, ASIC and Treasury was also attended by the ATO, ACCC and AUSTRAC who attend annually. The council discussed the recent Covid Impact on the economy and the financial system as well as the likely impacts from the impending end of many stimulus measures and loan deferral arrangements in September.

Looking ahead we have a quiet day for data releases. The only releases of significance will be an update from the Bank of England and US jobless claims data.

Matthew Dunshea

Client Relationship Manager