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November 23, 2020

Covid-19 economic shock data may be misinterpreted

By Paul Dennis

23 November

Robin Brooks, a chief economist at the Institute of International Finance (IIF), shared a chart on the International Monetary Fund (IMF) gross domestic product (GDP) growth forecasts in 2020.

Brooks is of the opinion that the Covid-19 pandemic is a temporary shock; therefore, there is little reason that the drop in actual or real GDP in 2020 should go hand in hand with the fall in potential GDP.

The US, however, is an exception, he added.

Economists believe that the notion of potential GDP used by the IMF maybe the same as used by many central banks, which is that it was partially driven by a supply shock.

As a result, the sharp drop in output did not lead to a significant fall in inflation during the pandemic.

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