The Day at a Glance | October 14 2020

The Top

· IMF adjusts its growth estimates upwards.

· WTO has ruled the EU can impose tariffs on US goods in retaliation for Boeing subsidies.

· ECB must provide greater stimulus if measures to contain the virus become more strict and longer lasting: Robert Holzman, Governor of Austria`s central bank.

Economic environment

The International Monetary Fund updated its global growth estimates for 2020 and 2021 with a slightly less negative outlook regarding the economic contractions for advanced economies this year. The organization revised its growth estimates upwards for 2020 from (-) 5.2% to (-) 4.4%; even though it expects a slightly weaker recovery in 2021 (5.2% vs. 5.4% prev.) The upwards revisions for 2020 were carried out mostly because of advanced economies (US -4.3% vs -8% prev.; Europe -8.3% vs -10.2% prev.), whose aggressive fiscal and monetary stimuli have boosted a faster recovery than initially expected. However, for emerging economies, downwards revisions were carried out (-3.3% vs -3.1% prev.). The largest adjustment was made to India`s economy (-10.3% vs -4.5% prev.) after a much larger than estimated contraction occurred in the 2Q20; meanwhile, China is the only country that is expected to grow this year (1.9% e.). The IMF reaffirmed that the recovery is still uncertain, it will take a long period of time and will be different among regions. According to the report, a rise in extreme poverty is expected for the first time in twenty years, along with greater inequality and a deterioration in the quality of life with respect to pre-pandemic times as most economies will lose productive potential and suffer long term consequences because of the virus. The organization once again called for maintaining fiscal stimuli that would prevent a substantial slowdown in the recovery. The IMFs base scenario considers lax monetary stances until 2025 in addition to persistent mitigation measures until 2021. Additionally, the organization expects an important increase in global debt, which could reach 125% of global GDP in 2021.