IMF fears worst recession since Great Depression

Gita Gopinath of the IMF

The International Monetary Fund said on Tuesday the global economy could shrink by 3% in 2020 — an IMF downgrade of 6.3 percentage points from January 2020.

The IMF said such a fall would amount to “the worst recession since the Great Depression, and far worse than the Global Financial Crisis.”

In its 2020 World Economic Outlook, the IMF predicted a partial rebound in 2021 but said its forecasts were marked by “extreme uncertainty.”

The world is likely to lose $9 trillion in output (GDP) over two years, according to the IMF’s best-case scenario.

Gita Gopinath, economic counsellor at the IMF, wrote: “Under the assumption that the pandemic and required containment peaks in the second quarter for most countries in the world, and recedes in the second half of this year, in the April World Economic Outlook we project global growth in 2020 to fall to -3 percent.

“This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period.

“This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.

“Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent.

“This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit.

“The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined.

“This is a truly global crisis as no country is spared.

“Countries reliant on tourism, travel, hospitality, and entertainment for their growth are experiencing particularly large disruptions.

“Emerging market and developing economies face additional challenges with unprecedented reversals in capital flows as global risk appetite wanes, and currency pressures, while coping with weaker health systems, and more limited fiscal space to provide support.

“Moreover, several economies entered this crisis in a vulnerable state with sluggish growth and high debt levels.

“For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession.

“For this year, growth in advanced economies is projected at -6.1 percent.

“Emerging market and developing economies with normal growth levels well above advanced economies are also projected to have negative growth rates of -1.0 percent in 2020, and -2.2 percent if you exclude China.

“Income per capita is projected to shrink for over 170 countries.

“Both advanced economies and emerging market and developing economies are expected to partially recover in 2021 …”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.