‘Great Lockdown’ will shrink global economy by 3pc in 2020
WASHINGTON: The global economy is expected to shrink by 3.0 per cent during 2020 in a stunning coronavirusdriven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s, the International Monetary Fund said.
The IMF, in its 2020 World Economic Outlook, predicted a partial rebound in 2021, with the world economy growing at a 5.8 per cent rate, but said its forecasts were marked by “extreme uncertainty” and that outcomes could be far worse, depending on the course of the pandemic.
“This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit,” Gita Gopinath, the IMF’S chief economist, said in a statement.
Under the Fund’s best-case scenario, the world is likely to lose a cumulative $9 trillion in output over two years - greater than the combined gross domestic product of Germany and Japan, she added.
The IMF’S forecasts assume that outbreaks of the novel coronavirus will peak in most countries during the second quarter and fade in the second half of the year, with business closures and other containment measures gradually unwound.
A longer pandemic that lasts through the third quarter could cause a further 3 per cent contraction in 2020 and a slower recovery in 2021, due to the “scarring” effects of bankruptcies and prolonged unemployment. A second outbreak in 2021 that forces more shutdowns could cause a reduction of 5 to 8 percentage points in the global GDP baseline forecast for next year, keeping the world in recession for a second straight year.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” the IMF said in its report. “The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”
The new forecasts provide a somber backdrop to the IMF and World Bank spring meetings, which are being held by videoconference this week to avoid contributing to the spread of the virus. The meetings normally draw 10,000 people to a crowded two-block area of downtown Washington.
The restrictions placed on travel around the world and the breakdown in supply chains have made the response to the pandemic a trying time for globalization, Gopinath said in a videoconference on Tuesday.
“But it is very important that this does not become a feature, where we reverse all the gains that we’ve gotten from globalization,” she said, calling specifically on countries to refrain from putting restrictions on exporting medical supplies.
The IMF predicted a partial rebound in 2021, with the world economy growing at a 5.8 per cent rate, but said its forecasts were marked by “extreme uncertainty” and that outcomes could be far worse, depending on the course of the pandemic.