The International Monetary Fund (IMF) have predicted a deep recession for Australia, which could be bad for some ASX shares.
What is the IMF?
It was created in 1945. It’s an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. Its primary purpose is to ensure the stability of the international monetary system.
What did the IMF say?
For 2020 the IMF is predicting that the Australian economy might drop by 6.7% because of the impacts of COVID-19, according to reporting by the AFR.
The almost 3-decade recession-less streak that Australia has gone through is expected to come to an end. The high levels of debt and loss of tourism will be particularly painful for some areas of the economy. The reliance on commodities is also a concern for the IMF. The IMF is calling this “The Great Lockdown”.
However, as a silver lining the IMF is then predicting a V-shaped recovery with growth of 6.1% in 2021.
What are some of the shares that could face trouble?
Whilst the IMF isn’t like a broker giving out stock tips, I think it’s pretty clear some of the ASX shares that are going to see a profit hit (even if the share price decline has already occurred). Remember share price movements don’t necessarily match GDP growth.
Banks like CBA (ASX: CBA), NAB (ASX: NAB), ANZ (ASX: ANZ) and Westpac (ASX: WBC) are likely to face trouble. Tourism shares like Crown Resorts (ASX: CWN), Sydney Airport (ASX: SYD), Webjet (ASX: WEB) and Star Entertainment (ASX: SGR) could also see big profit hits this year.
But technology shares could be the way to go instead with digital services, like these ideas:
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Disclosure: at the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.
