Britain’s economy may shrink by 10.2pc, IMF warns

A “CATASTROPHIC hit to the global labour market” will see a 10 per cent plunge in Britain’s economy – and it could take two years for worldwide GDP to recover, the International Monetary Fund (IMF) has warned.

Global activity will take a hit of more than $12 trillion (£9.6 trillion) due to coronavirus by the end of 2021, the IMF said, with a drop in Britain’s GDP of 10.2 per cent in 2020.

In an update to its already grim set of forecasts in April, the IMF said it now expects the global economy to contract by 4.9 per cent in 2020, compared with the three per cent it predicted two months ago.

Gita Gopinath, the IMF’s economic counsellor, said: “The Covid-19 pandemic pushed economies into a great lockdown, which helped contain the virus and save lives, but also triggered the worst recession since the Great Depression.

“Over 75 per cent of countries are now reopening at the same time as the pandemic is intensifying in many emerging market and developing economies.

“Several countries have started to recover.

“However, in the absence of a medical solution, the strength of the recovery is highly uncertain and the impact on sectors and countries uneven.”

Ms Gopinath added that the IMF expects living standards to drop in more than 95 per cent of countries this year as a result of the pandemic.

She cautioned central banks and governments against withdrawing emergency support even as the recovery appears to take hold.

She said: “Policymakers should remain vigilant and policies will need to adapt as the situation evolves.

“Substantial joint support from fiscal and monetary policy must continue for now, especially in countries where inflation is projected to remain subdued.”