The global economy is now projected to contract by 4.4% in 2020 — an upward revision from an estimate of -4.9% made in June (which has now also been revised to -5.2% due to a new methodology used by the IMF). The IMF's forecast assumes that social distancing due to the coronavirus pandemic will continue into 2021, and that local transmission will fall everywhere by the end of 2022.
Among major economies, only China is expected to expand in 2020. The IMF believes the country, which battled Covid-19 earlier than the rest of the world and was quickly able to move out of lockdown due to strict containment measures, will grow by 1.9%.
"We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast," the IMF's chief economist, Gita Gopinath, said in the latest World Economic Outlook.
She added that the revision was driven by better-than-expected growth in advanced economies and China during the second quarter of the year and signs of a more rapid recovery in the third quarter.
However, the outlook warned that the coronavirus crisis is far from over.
The IMF projected "only limited progress" going forward and cut its gross domestic product growth expectations for next year to 5.2%, from an estimate of 5.4% made in June.
"While the global economy is coming back, the ascent will likely be long, uneven, and uncertain," Gopinath said, while adding that "prospects have worsened significantly in some emerging market and developing economies."
Emerging market and developing economies are seen contracting by 3.3% this year, but in places like India, GDP is seen falling by more than 10%.
Meanwhile, the United States economy is set to fall by 4.3% this year, but the economic contractions in the UK, France, Italy and Spain are around 10%.
Looking ahead, the IMF offered a bleak look at how the global economy might perform over the medium term, its first such forecast since the outbreak began.
Global growth is expected to slow to roughly 3.5% between 2022 and 2025, leaving the output of most economies below levels that were predicted before the pandemic.
The IMF emphasized that uncertainty surrounding its projections is "unusually large" given the lack of clarity on the health crisis and the economic response, especially as global debt levels increase.
The recovery "is not assured while the pandemic continues to spread," the IMF said in its latest economic analysis.
The IMF has advised governments to keep some degree of accommodative policies to prevent a wider gap in income distribution, despite growing levels of public debt.
In addition, the IMF mentioned that geopolitical tensions, trade friction, natural disasters, changes to financing conditions and further outbreaks remain downside risks to its projections.