GREAT DEPRESSION 2.0: IMF

World economy will shrink 3 per cent and take $9T hit as a result of Covid-19

dubai — The world economy is poised to witness the worst recession this year since the Great Depression of 1929-39 with both advanced and emerging economies slipping into the recession simultaneously for the first time in the past eight decades due to coronavirus, according to the IMF’s latest forecast released on Tuesday.

Gita Gopinath, chief economist at the IMF, projected that the world economy will shrink by three per cent in 2020 and will also take an accumulative loss of $9 trillion as a result of recession, prompted by lockdowns. But if the pandemic is not contained in the second-half of 2020, the world economy will shrink another three per cent. And the contraction could reach eight per cent if the pandemic persists in 2021.

For the UAE and Gulf region, the IMF projections were also similar to other countries and region, predicting recession in 2020 but strong recovery next year.

The UAE economy will contract 3.5 per cent this year but will bounce back with 3.3 per cent growth in 2021. Saudi Arabia, the region’s largest economy, will shrink 3.9 per cent, Qatar 4.3 per cent, Kuwait 1.1 per cent and Oman 2.8 per cent. But all the regional nations will rebound strongly in 2021 as world economy will pick pace, resulting in higher oil prices and stronger non-oil sector growth.

The IMF forecast that all the major developed economies will take a massive hit this year with the US economy shrinking 5.9 per cent, Japan registering negative growth of 5.2 per cent, the UK contracting 6.5 per cent and Italy posting negative 9.1 per cent growth. Germany and France will also shrink 7 per cent and 7.2 per cent, respectively.

“The accumulative loss of 2020-21 could be $9 trillion which is equal to the size of German and Japanese economies combined. For the first time since the Great Depression, both advance and emerging economies are in recession simultaneously,” said Gopinath.