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 (IMF) has said in its latest forecast.
The IMF said Tuesday that it expects the global economy to shrink three per cent this year – far worse than its 0.1% dip in the Great Recession year of 2009 – before rebounding in 2021 with 5.8% growth. The IMF however, acknowledged, 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 IMF had forecast moderate global growth of 3.3% this year.
However, far-reaching measures to contain the pandemic like lockdowns, business shutdowns, social distancing and travel restrictions have suddenly brought economic activity to a near-standstill across much of the world.
“The world has been put in a great lockdown,” IMF’s chief economist, Gita Gopinath, told reporters Tuesday. “This is a crisis like no other.”
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 organisation, 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 in light of 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 well before other countries. Worldwide trade will plummet 11% this year, the IMF predicted, and then grow by 8.4 per cent in 2021.
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.
PTI