The global economy is expected to shrink by 3.0% during 2020 in a stunning Coronavirus-driven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s, the International Monetary Fund said on Tuesday.
The IMF, in its 2020 World Economic Outlook, predicted a partial rebound in 2021, with the world economy growing at a 5.8% rate, but said its forecasts were marked by “extreme uncertainty” and that outcomes could be far worse, depending on the course of the pandemic.
Under the Fund’s best-case scenario, the world is likely to lose a cumulative $9 trillion in output over two years, greater than the combined gross domestic product of Germany and Japan.
The IMF’s forecasts assume that outbreaks of the novel coronavirus will peak in most countries during the second quarter and fade in the second half of the year, with business closures and other containment measures gradually unwound.
A longer pandemic that lasts through the third quarter could cause a further 3% contraction in 2020 and a slower recovery in 2021, due to the “scarring” effects of bankruptcies and prolonged unemployment.
The new forecasts provide a sombre backdrop to the IMF and World Bank spring meetings, which are being held by videoconference this week to avoid contributing to the spread of the virus.
The restrictions placed on travel around the world and the breakdown in supply chains have made the response to the pandemic a trying time for globalization, Gopinath said in a videoconference on Tuesday.
The strong and healthy economic recovery will not be sustainable if the world de-globalizes, she said.