IMF sees global growth at worst level since 1930s
Grim assessment has US economy sliding 5.9% this year
WASHINGTON — Beaten down by the coronavirus outbreak, the world economy in 2020 will suffer its worst year since the Great Depression of the 1930s, the International Monetary Fund says in its latest forecast.
The IMF said Tuesday that it expects the global economy to shrink 3% this year — far worse than its 0.1% dip in the Great Recession year of 2009 — before rebounding in 2021 with 5.8% growth. It acknowledges, though, that prospects for a rebound next year are clouded by uncertainty.
The bleak assessment represents a breathtaking downgrade by the IMF.
In its previous forecast in January, before COVID-19 emerged as a grave threat to public health and economic growth worldwide, the international lending organization had forecast moderate global growth of 3.3% this year. But far-reaching measures to contain the pandemic — lockdowns, business shutdowns, social distancing and travel restrictions — have brought economic activity to a nearstandstill across much of the world.
“This is a crisis like no other,” Gita Gopinath, the IMF’s chief economist, said.
Gopinath said the cumulative loss to the global gross domestic product, the broadest gauge of economic output, could amount to $9 trillion — more than the economies of Germany and Japan combined.
The IMF’s twice-yearly World Economic Outlook was prepared for this week’s spring meetings of the 189-nation IMF and its sister lending organization, the World Bank.
Those meetings, along with a gathering of finance ministers and central bankers of the world’s 20 biggest economies, will be held virtually for the first time amid the coronavirus outbreak.
In its latest outlook, the IMF expects economic contractions this year of 5.9% in the United States, 7.5% in the 19 European countries that share the euro currency, 5.2% in Japan and 6.5% in the United Kingdom. China, where the pandemic originated, is expected to eke out 1.2% growth this year. The world’s second-biggest economy, which had gone into lockdown, has begun to open up.
Worldwide trade will plummet 11% this year, the IMF predicts, and then grow 8.4% in 2021.
Last week, the IMF’s managing director, Kristalina Georgieva, warned that the world was facing “the worst economic fallout since the Great Depression.” She said that emerging markets and lowincome nations across Africa, Latin America and much of Asia were at especially high risk. On Monday, the IMF approved $500 million to cancel six months of debt payments for 25 impoverished countries.
The IMF cautioned that its forecast is shrouded by unknowns. They include the path that the virus will take; the effectiveness of policies meant to contain the outbreak and minimize the economic damage; and uncertainty over whether, even many months from now, people will continue to isolate themselves and depress spending as a precaution against a potential resurgence of the virus.
Gathering at their own virtual meeting, finance officials of the Group of Seven major industrial countries, including U.S. Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell, pledged to “use all available policy tools” to achieve a strong recovery.
Meghan Clem, CEO of the wedding and partyplanning company Intertwined Events, says she is hoping that some government loans come through so she can continue to pay her staff. The next two to three months will likely be the worst of the crisis for Intertwined Events.
“All events have been canceled or postponed to the fourth quarter, so we are seeing a full stop of revenue for May, June and likely July,” said Clem, whose company is based in Irvine, California.