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 percent this year – far worse than its 0.1 percent dip in the Great Recession year of 2009 – before rebounding in 2021 with 5.8 percent 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 percent this year. But far-reaching measures to contain the pandemic – 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,” the IMF’s chief economist, Gita Gopinath, told reporters. “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 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 in light of the coronavirus outbreak.
In its latest outlook, the IMF expects economic contractions this year of 5.9 percent in the United States, 7.5 percent in the 19 European countries that share the euro currency, 5.2 percent in Japan and 6.5 percent in the United Kingdom. China, where the pandemic originated, is expected to eke out 1.2 percent 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 percent this year, the IMF predicts, and then grow 8.4 percent 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.
On a hopeful note, the IMF noted that policymakers in many countries have engineered what it calls a “swift and sizable” response to the economic crisis. In the United States, for instance, the Federal Reserve has intervened aggressively to smooth lending markets. And Congress has enacted three separate rescue measures, including a $2.2 trillion aid package – the largest in history – that is meant to sustain households and businesses until the outbreak recedes and economic life begins to return to normal.
