Global economic output is expected to be about 3% lower in 2024 than projected before the COVID-19 pandemic but its medium-term impact won't be as severe as that of the global financial crisis of 2008-09, the International Monetary Fund said on Wednesday.
The IMF said the prospects for "scarring" from the current crisis remained substantial, even if systemic financial stress and the associated long-lasting economic damage had been largely avoided due to the unprecedented policy actions taken.
The path to recovery remained challenging, especially for countries with limited fiscal resources, the IMF said in a blog post based on its updated World Economic Outlook.
"Unlike what happened during the global financial crisis, emerging market and developing economies are expected to have deeper scars than advanced economies, with losses expected to be the largest among low-income countries," it said.
Economies that are more reliant on tourism or have a larger share of high-contact sectors such as restaurants and retail trade, are projected to have more persistent losses, it said.
This was true for the Caribbean or the Pacific Islands, with gross domestic product in the latter estimated to be 10% lower in 2024 than pre-pandemic projections, the IMF said.
The COVID-19 shock could also have a bigger impact on the labor market over the medium- and longer term, since some of those high-contact sectors may shrink permanently, the IMF said.
It said productivity could also be negatively affected by a decline in competition if dominant firms became more entrenched and further increased their market power.
The IMF will release the full World Economic Outlook and updated growth projections on April 6.