- Global Economy to Shrink by 3% in 2020 – IMF
The International Monetary Fund (IMF) on Tuesday said the numerous lockdown by nations in a move to curb the spread of COVID-19 could erase 3 percent of global growth in 2020.
In the Fund’s ‘2020 World Economic Outlook,’ it predicted a partial rebound for the global economy in 2021. The Fund said the world’s economy could rebound by 5.8 percent but stated that its projections were marked by ‘extreme uncertainty’ and the outcomes could be worse than projected.
“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,” IMF chief economist Gita Gopinath said in a statement.
She explained that the world could lose a combined $9 trillion in output in the next two years, bigger than the combined GDP of both Germany and Japan.
Also, the economist said if the pandemic lasted through the third quarter, the world could lose another 3 percent in GDP and even worse recovery in 2021 due to the large size of bankruptcies and prolonged unemployment.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” the IMF said in its report. “The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”
Kristalina Georgieva, the Managing Director, IMF, last week said about $8 trillion fiscal stimulus injected by governments to curtail the impact of COVID-19 was not likely to be enough.
Therefore, the IMF said the Euro-area would contract by 7.5 percent this year, with hit economy contracting the most at an estimated 9.1 percent. This, it said would be followed by Spain’s 8 percent economic contraction; France’s 7.2 percent declined and Germany’s 7 percent negative growth.
However, it projected that the region would grow by combined 4.7 percent in 2021 when it predicted global recovery would commence.
The Chinese economy is expected to maintain current momentum and expand at 1.2 percent this year, below its normal 6 percent average growth rate. Again, the Fund said the Chinese economy would rebound by as much as 9.2 percent growth in 2021.
The US, the world’s largest economy, would shrink by 5.9 percent this year but recover with a 4.7 percent growth rate in 2021 under the Fund’s best scenario.