IMF Now Sees Japan GDP Contraction Worse Than During 2009 Crisis

(Bloomberg) -- The International Monetary Fund said it now sees Japan’s economy shrinking more this year than during the global financial crisis.

The IMF on Wednesday forecast the world’s third-largest economy will shrink 5.8% in 2020. In April, when the damage from the coronavirus was less clear, the lender forecast a 5.2% contraction for Japan, slightly less bad than in 2009.

Japan’s downgrade came amid a wave of cuts to growth forecasts for major countries and the globe. The lender now sees the world economy shrinking almost 5% this year, with the pandemic hitting harder and wider than initially expected, it said in its quarterly outlook report. It also noted that recovery is likely to be slower than first thought.

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Despite the worsening projections, the IMF said it still sees Japan suffering less this year than all of its peers in the Group of Seven nations, whose economies it forecasts shrinking more than 9% on average.

In Japan, Prime Minister Shinzo Abe’s administration has struggled to get stimulus aid to some residents and businesses, but the outbreak has also been less severe than in the U.S. and much of Europe. The government late last month was able to lift a nationwide state of emergency and went a step further last week by lifting restrictions on domestic travel.

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The IMF’s downgrades are likely to inform the Bank of Japan’s thinking when it updates its own growth forecasts next month. The BOJ in April saw the economy shrinking between 3% and 5% in the 12 months through next March, followed by a rebound of 2.8% to 3.9% the next year.

©2020 Bloomberg L.P.