IMF: Pandemic causing deep recession
The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around US$9 trillion, greater than the economies of Japan and Germany combined. Gita Gopinath
April 16, 2020
THE coronavirus pandemic is pushing the global economy into its deepest recession in a century, cutting world output by three percent this year, and the crisis could get worse, the International Monetary Fund said.
The downturn will slash US$9 trillion from the world economy, IMF chief economist Gita Gopinath told reporters as she presented the latest forecasts in the World Economic Outlook.
If the virus is contained and economies can begin operating again, 2021 should see a rebound of 5.8 per cent, according to the IMF.
But the authors acknowledged the difficulty in making an accurate forecast amid the rapidly changing situation.
With much of the global economy shut down amid efforts to contain the virus and keep health systems from collapsing, the IMF warned that there are “severe risks of a worse outcome” due to the “extreme uncertainty around the strength of the recovery.”
“The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around US$9 trillion, greater than the economies of Japan and Germany combined,” Gopinath said.
The coronavirus has infected nearly two million people worldwide and killed close to 120,000, bringing travel to a standstill and forcing businesses, shops and restaurants to close.
“Much worse growth outcomes are possible and maybe even likely,” the report cautioned, “if the pandemic and containment measures last longer... or if widespread scarring effects emerge due to firm closures and extended unemployment.”
The report, released ahead of the virtual spring meetings of the IMF and World Bank, said “The Great Lockdown” – as the IMF dubbed the global downturn – is the worst since the Great Depression of the 1930s.
It also is the first contraction since 2009 during the global financial crisis, but that episode hardly bears comparison. Though the effects lingered, the decline amounted to just 0.1 per cent, and large emerging market economies were still growing at a solid pace.
This year, the only economies expected to be spared from recession are China – where the virus originated – and India, but even those countries will see only relatively paltry growth of 1.2 per cent and 1.9 per cent, respectively.
In the depression nearly a century ago, the global economy contracted by about 10 per cent while advanced economies shrunk by 16 per cent from 1929 to 1932. The IMF now expects advanced economies to shrink by six per cent in 2020.
The US economy is expected to contract by 5.9 per cent but see growth recover by 4.7 per cent next year.
However, the forecasts assume the pandemic will fade in the second half of the year.
The IMF projects drops of 7.2 per cent in France and 6.5 per cent in Britain, but the governments in those countries are even more pessimistic, projecting contractions of eight per cent and 13 per cent, respectively. — AFP