Key Highlights
- International Monetary Fund (IMF) predicts global economy to contract by -3% in 2020
- IMF predicts “partial recovery” in 2021 IF there improvement in health crisis
The COVID – 19 pandemic knows no boundaries. Everywhere in the world has, is currently and will experience this devastating health crisis and its staggering economic and financial impacts. As a result, the International Monetary Fund (IMF) is expecting the global1930’seconomy to suffer the worst financial upheaval since the 1930’s Great Depression.
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Earlier in January 2020, the IMF predicted that the global GDP would expand +3.3% this year. Now, the IMF is forecasting that the global economy will contract -3% in 2020.
“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, “ said Gita Gopinath, IMF’s chief economist in the organization’s latest World Economic Outlook report.
Other international organizations share the IMF’s warnings that COVID-19 is igniting massive economic challenges. The World Trade Organization (WTO) estimates that global trade will contract between -13% – -32% in 2020. The Organization for Economic Coordination and Development (OECD) warns too that the economic damage caused by COVID-19 will last “for a long time to come.”
Gopinath added to her remarks at a press conference this week. Calling this crisis “The Great Lockdown,” Gopinath said, “…this is a crisis like no other…the magnitude and speed of collapse in activity that has followed (the lockdown) is unlike anything we’ve experience in our lifetimes.”
The International Monetary Fund has a $1T lending capacity for its 189 member countries. More than 90 of those countries have already asked for financial help.
Latest IMF forecasts indicate the US economy will contract by -5.9% this year and that the euro zone economy will shrink even more to -7.5%. GDP in both Italy and Spain, the worst hit European countries by COVID-19, is expected to be hurt more badly with contractions of -9.1% and -8% respectively. China, on the other hand, is expected to see its GDP grow by +1.2% in 2020.
Advice to governments around the world from the IMF includes…
- Focus on health crisis first – spend on testing, medical equipment and other related health care costs
- Provide tax deferrals, wage subsidies and cash transfers to hardest hit individuals and businesses
- Prepare to gradually lift lockdown measures
One bright light in the IMF’s most recently revised forecasting is the organization’s projections for global GDP grow in 2021. The IMF 2021 estimate is pointing to +5.8% growth in global GDP. Remember that this projection comes from a lower base following the IMF’s 2020’s projected decrease in global GDP.
Let’s take this positivity when and where we can find it.
Thanks to CNBC’s Silvia Amaro.
Also read: Small Businesses- DO NOT MISS OUT – Apply for Paycheck Protection Program, Podcast: Breaking News, SBA PPP Program | 12 Mortgage Forbearance, Housing Markets in Northeast & Florida Extremely Vulnerable to COVID-19 Impacts
