Coronavirus-driven recession will be the worst since Great Depression of 1930s, economy rebound uncertain: IMF
At a time when governments across the planet are thinking over ways to minimize the economic impact of the coronavirus pandemic, the International Monetary Fund (IMF) came up with a sinister prediction. On Tuesday, April 14, the body said the global economy is expected to see 2020 as its worst year since the Great Depression of the 1930s. It has predicted that the global economy will shrink three percent this year, much worse than the 0.1 percent fall in the Great Recession of 2008-09 before rebounding next year with 5.8 percent growth. However, it also conceded that the prospects for the rebound are not very certain, Associated Press reported.
In its forecast made in January when the COVID-19 pandemic was yet to surface as a grave threat, the IMF spoke about a global growth of 3.3 percent in 2020. But the situation saw a massive fall since then because of lockdowns and other shutdowns that have brought the economy to a screeching halt.
“The world has been put in a great lockdown,’’ IMF’s chief economist Gita Gopinath told reporters, the AP report said. “This is a crisis like no other.” The Indian-born expert said the cumulative loss to the global gross domestic product could be worth $9 trillion - more than the combined economies of Germany and Japan.
The international monetary body expects economic contractions this year in the US (5.9 percent); 19 European nations that share euros (7.5 percent); Japan (5.2 percent) and the UK (6.5 percent). China, where the pandemic said to have originated, could see 1.2 percent growth this year. Global trade will fall 11 percent in 2020 and then grow 8.4 percent in 2021, the IMF expected.
Worldwide trade will plummet 11% this year, the IMF predicts, and then grow 8.4% in 2021.
Emerging markets face high risk
Kristalina Georgieva, the IMF’s managing director, said last week that the world was countering the worst economic fallout since the 1930s’ depression. She also sounded the alarm that emerging markets in Africa, Latin America and much of Asia were particularly at high risk. On Monday, April 13, the IMF approved $500 million to cancel six months of debt repayments for 25 impoverished nations, the Associated Press report added.
While the body said that its forecasts are still uncertain over factors like the virus’ future and the duration of people’s self-isolation, it sparked optimism by saying policymakers in many countries came up with a “swift and sizable” response to the economic crisis. It cited the case of the US saying the Federal Reserve here aggressively stepped in to make the lending markets smooth. It also spoke about the Congress’s three rescue measures, including the aid package worth $2.2 trillions that is meant to support households and businesses until things again start looking up. The package includes direct payment to individuals, business loans, grants to companies that decide not to lay off workers and expanded economic benefits.
The IMF has also appealed to nations to work together to fight COVID-19 that has killed over 126,000 people worldwide. Nearly two million people have been affected. “Countries urgently need to work together to slow the spread of the virus and to develop a vaccine and therapies to counter the disease,” the IMF said.
The forecasts prepared the backdrop for the IMF and World Bank’s spring meetings that are being held via video-conferencing this week (April 14-17) as a precautionary measure against the spread of the pandemic.