The International Monetary Fund has warned countries not to withdraw economic support prematurely to prevent further setbacks in the fight against the coronavirus pandemic.
In its latest World Economic Outlook, the IMF says the economic recovery is not assured while the pandemic continues to spread.
“With renewed upticks in COVID-19 infections in places that had reduced local transmission to low levels, re-openings have paused, and targeted shutdowns are being reinstated,” the Washington-based institution says.
It names Australia as one of a number of countries where there has been a rise in COVID-19 cases having previously flattened the infection curve.
“Preventing further setbacks will require that policy support is not prematurely withdrawn,” it says.
Shadow Treasurer Jim Chalmers pounced on the comments.
“Australians can’t afford a slow, jobless recovery caused by a government too eager to rip money out of the economy before the recovery takes hold,” Dr Chalmers said.
Even so, the IMF says that many economies have started to recover at a faster pace than anticipated after reopening from what it describes as the “Great Lockdown”.
“We are projecting a somewhat less severe though still deep recession in 2020,” it says.
It says second quarter economic growth results in large, advanced economies were not as negative as projected, while China’s return to growth was stronger than expected and there are signs of a more rapid recovery in the third quarter.
“While the global economy is coming back, the ascent will likely be long, uneven and uncertain,” the IMF says.
It now expects world growth to contract by 4.4 per cent in 2020 compared to the 5.2 per cent decline it last forecast in an update in June.
For 2021, it now sees a 5.2 per cent expansion rather than 5.4 per cent.
For Australia, its updated projections do not take into account measures taken in the October 6 federal budget, which came after the IMF’s September 28 cut-off date for the outlook.
However, it forecasts the Australian economy will contract by 4.2 per cent in 2020 and then rebound by three cent in 2021.
These are markedly different from the 6.7 per cent collapse it had predicted back in April for this year and the 6.1 per cent rebound it had anticipated for next year.
In the budget, the Australian Treasury forecasts a 3.75 per cent contraction for calendar year 2020 and positive growth of 4.25 per cent in 2021.
However, the IMF was more optimistic on Australia’s near-term unemployment outlook, forecasting a jobless rate of 6.9 per cent for 2020, when Treasury sees a further rise to eight per cent by the end of the year.