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 today that it expects the global economy to shrink three per cent this year — far worse than its 0.1 per cent dip in the Great Recession year of 2009 — before rebounding in 2021 with 5.8 per cent growth.
READ MORE: Keep up to date with the latest global coronavirus developments
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 organisation had forecast moderate global growth of 3.3 per cent 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 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, are being held virtually for the first time in light of the coronavirus outbreak.
READ MORE: Great Depression-sized economic shock coming down pipeline
In its latest outlook, the IMF expects economic contractions this year of 5.9 per cent in the United States, 7.5 per cent in the 19 European countries that share the euro currency, 5.2 per cent in Japan and 6.5 per cent in the United Kingdom.
China, where the pandemic originated, is expected to eke out 1.2 per cent 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 per cent this year, the IMF predicts, and and then grow 8.4 per cent 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 low-income nations across Africa, Latin America and much of Asia were at especially high risk. And on Monday, the IMF approved US$500 million (AUD$780m) to cancel six months of debt payments for 25 impoverished countries so they can help confront the pandemic.
Just three months ago, the IMF had forecast that more than 160 countries would register income growth on a per-capita basis. Now, it expects negative per-capita income growth this year in 170 countries.
The IMF cautioned Tuesday that its latest forecast is shrouded by unknowns.
They include the path that the virus will take; the effectiveness of policies meant to contain the outbreak and minimise 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 economic policymakers in many countries have engineered what it calls a “swift and sizable” response to the economic crisis.
Some countries can’t afford sufficiently aggressive rescue plans, the IMF said, and “may require external support.”
Georgieva has said that the IMF is prepared to commit its US$1 trillion (AUD$1.5t) in lending capacity to support nations that need help in dealing with the pandemic.
The IMF is also calling on countries to work cooperatively to fight the pandemic.
“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 lending agency said.
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