On May 12th, the International Monetary Fund adjusted its very grim global growth forecast to make it even more pessimistic.
International Monetary Fund Managing Director Kristalina Georgieva said it was “very likely” the Fund would cut global growth forecasts further as the coronavirus pandemic was hitting many economies harder than previously projected.
“Incoming data from many countries is worse than our already pessimistic projections,” Georgieva said during a webcast conference sponsored by the Financial Times. “Very likely we are going to come up with the update to our projections some time in June, and at that point … our expectation is that there would be a bit more bad news in terms of how we see 2020.”
At the start of April, the forecast was that business closures and lockdowns to slow the spread of the virus would throw the world into the deepest recession since the 1930s Great Depression, with gross domestic product output shrinking 3% in 2020.
The IMF typically revises its World Economic Outlook forecasts in early July.
Georgieva said the worsening data was also likely to mean that emerging markets and developing economies would need more than $2.5 trillion in additional financing to grapple with the pandemic.
A month after the IMF and World Bank Spring Meetings, Georgieva said IMF members still lacked agreement over an issue of new IMF Special Drawing Rights, a step last taken in 2009 that would provide hundreds of billions of dollars in new liquidity for all IMF members, rich and poor.
“During our spring meetings, it was very clear the membership said, ‘Everything is on the table. Let’s see how this crisis evolves in the future.’”
Meanwhile, the US shale oil industry is in dire straits.
Chesapeake Energy Corp said it cannot access financing and is considering restructuring its debt of more than $ 9billion if oil prices do not recover after a sharp drop.
Applications from the company showed that the company’s total debt is more than $1 billion in debt repayment and interest expenses, of which $250 million in “senior notes” were due to be paid off this year.
The company said that a review of the value of its unused oil and gas reserves this quarter is likely to show a decline due to its troubled finances, which will reduce the ability to borrow for these assets.
Chesapeake reported that its net loss available to shareholders increased to $8.3 billion, or $852.97 per share, from $44 million, or $6.37, due to an impairment of assets of $8.5 billion. But at the same time the company said it would pay $25 million in weekly rewards to top managers.
Chesapeake, which had about 2,300 employees at the end of 2019, laid off about 13% of its workforce in April. In the last quarter, it terminated the contracts of most of the employees who joined it as a result of the acquisition in 2018 of the Texas oil producer WildHorse for $4 billion.
The company said it shut down wells and delayed the production of commercial volumes for sale in some areas, which will reduce its projected oil production by about 50% and 37%, respectively, in May and June. Shares of the company fell about 8% during day trading.
Similarly to Saudi’s Aramco – spending is being cut, but the shareholders and managers are still being paid “fairly” while workers are being laid off. There’s no way for that to backfire, of course, in the US alone, 20.5 million jobs were lost in the United States, and the unemployment rate reached 14.7% and US officials expect May to be even worse.
MORE ON THE TOPIC:
- Saudi Arabia And Co Vow Further Production Cuts To Salvage What Remains Of Crude Oil Market
- Crude Oil Price Recovers Slightly, But There’s Little Hope Of Avoiding Recession
- U.S. Threatens To Default On Debt Payments, As Beijing Mulls Dumping Treasuries