By Eric Zuesse
The IMF now predicts that China next year will have the highest rate of economic growth since 2011, which was the last time when China’s GDP growth-rate exceeded 9% (at 9.6%). China’s growth-rate had averaged around 9% between 1978 and 2011, then slid to around 6.5%. If the IMF is correct, then 2021 will be the first time in a decade that the country’s GDP growth-rate is restored to its former long-time norm.
On April 14, the IMF’s “World Economic Outlook, April 2020” stated that, “the global economy is projected to contract sharply by -3 percent in 2020, much worse than during the 2008-09 financial crisis.” The “Executive Summary” makes no mention, however, of either “recession” or “depression.”
This is because the IMF predicts that the coronavirus-19 economic impact will end this year. Their projections call for the best performance being in “Emerging Market and Developing Economies” (the group that includes China) which grew at +3.7% in 2019, to grow at -1% this year, and at +6.6% in 2021.
Among Advanced Economies,” the U.S., which grew at +2.3% in 2019, is projected to grow at -5.9% this year, and +4.7% in 2021. The Euro Area, which grew at +1.2% in 2019, is projected to grow at -7.5% this year, and +4.7% in 2021. Each of the two countries, UK and Canada, grew at around +1.5% in 2019 and is projected to grow at around -6.3% this year, and +4.1% in 2021. Japan grew -0.7% in 2019 and is projected at -5.2% now, and +3.0% in 2021. China is projected at: +6.1%, +1.2%, and +9.2%.
Other main “Emerging Market and Developing Economies” are: India, at +4.2%, +1.9%, and +7.4%.’ and Russia, at +1.3%, -5.5%, and +3.5%.
Also on April 14, I headlined “Why at Least America Will Be in Another Great Depression”, and closed:
On April 13th was the announcement that “Morgan Stanley warns that a potential second wave of infections could strike around November/December”. The firm said “We believe the path to re-opening the economy is going to be long. It will require turning on and off various forms of social distancing and will only come to an end when vaccines are available, in the spring of 2021 at the earliest.” How will it then be possible to avoid a Second Great Depression? Will the Fed be able to continue printing money without limit? Would an immense financial crash be avoided even if it can? The realistic outlook now appears to be super-grim. Perhaps sooner than anyone now expects, every investor will start selling into paper investment-markets that suddenly have no buyers at anything like today’s prices.
If that does turn out to be the case, then America’s crash would negatively impact other nations’ economies, and therefore even China won’t be likely to grow at anything like +9.2% in 2021. For the entire globe, the IMF’s “World Economic Outlook” is predicting that the growth-rate, which was +2.9% in 2019, will be -3.0% this year, and +5.8% in 2021. So, according to the IMF, the rate of growth globally will be twice as high in 2021 as it was in 2019; and, supposedly, the coronavirus impact on the global economy is just a one-year blip, instead of likely to affect the global economy over a longer term.
(For comparison: America’s total economic contraction during the first three years of the First Great Depression, 1929-31, was from a GDP of 103.6, down to 76.5, or -26%, and that was only the start, the nadir being -46% in 1933.)
The IMF paints an optimistic picture of what’s now happening. I don’t think that this is realistic. Of course, only time will tell whether the IMF’s predictions were based on sound assumptions, or whether (as I believe) the global impact of the coronavirus-19 plague will be long-lasting, instead of merely a one-year blip (as they think).
Above all, I believe that the impacts which this plague will have on global supply-chains, and on the distribution of wealth (concentrating wealth even more amongst the billionaires, as is especially likely in the U.S.) will be enormous and fundamental, producing major changes for perhaps a decade to come, and perhaps affecting also the balance of power amongst the world’s nations. But, of course, only time will be able to tell. If the IMF’s latest forecasts turn out to be as inaccurate as I expect, then existing economic theory is (and finally ought to be generally recognized to be) trash.
Economists’ forecasts have in the past turned out to be no better than the mere guesses of non-economists, and existing economic theory itself will therefore need to be rejected and fundamentally replaced if this phenomenon occurs yet again after the coronavirus plague. A consistent bad record of prediction cannot characterize any authentic science.
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