The global economy is likely to suffer the worst recession since the Great Depression this year with the global GDP contracting by 3%, the International Monetary Fund said on Tuesday. The Covid-19 outbreak and the strategy of lockdown adopted by most world nations to check the spread of the deadly virus are expected to play havoc with the world economy. IMF had, in January, projected the world economy to grow at 3.3% in 2020.
The IMF projects India GDP to grow 1.9% in 2020 and rebound to 7.4% next year. In January, the organisation had predicted the Indian economy to grow 5.8%. The IMF expects the US economy to shrink by 5.9% this year, while the euro zone’s economy will witness 7.5% contraction. China, which has been the growth engine of the world economy for more than two decades, will expand by 1.2% in 2020.
“The magnitude and speed of collapse in activity that has followed (the lockdown) is unlike anything experienced in our lifetimes,” Gita Gopinath, the IMF’s chief economist, said in the latest World Economic Outlook report. “A partial recovery is projected for 2021… but the level of GDP will remain below the pre-virus trend,” she said.
The IMF said the duration and intensity of the economic shock is uncertain, adding that social distancing and isolation policies prescribed to check the spread of the new coronavirus will make the revival difficult. It estimates the cumulative loss to global GDP from the pandemic could be around $9 trillion, more than the combined economies of Japan and Germany.
The Washington-based organisation said it has received calls for emergency funding from 90 out of its 189 members. IMF has the ability to lend $1 trillion to its members facing economic difficulties.
The IMF has advised member nations to focus on the health crisis, by funding testing, medical equipment and other healthcare related expenses. It has also asked governments to provide tax reliefs, wage subsidies and cash transfers to the most vulnerable citizens and companies.
The IMF expects the pandemic to peak in the April-June quarter in most countries. It says the Great Lockdown will be far worse than the global financial crisis of the last decade. It sees a global rebound due to effective policy actions by governments to prevent bankruptcies, job losses, and system-wide financial strains. The recovery will be partial as the level of economic activity is expected to remain below the level projected earlier.