The International Monetary Fund (IMF) has warned the recession sparked by the coronavirus is on track to be the worst since the Great Depression, far worse than the global financial crisis 12 years ago.
The IMF released updated projections for the global economy yesterday. 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, the IMF is projecting global growth in 2020 to fall to -3%. 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,” wrote IMF’s director of research, Gita Gopinath, in a blog post on the organisation’s website yesterday, adding: “This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods.”
For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession, IMF warned. For this year, growth in advanced economies is projected at -6.1%. Emerging market and developing economies with normal growth levels well above advanced economies are also projected to have negative growth rates of -1% in 2020, and -2.2% excluding 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.
A report published earlier this month by the World Trade Organisation (WTO) stated that world trade is expected to fall by up to 32% this year due to the disruption of economic activity caused by the Covid-19 pandemic.
WTO economists predicted the decline, likely to range anywhere from 13% to 32%, will most likely be greater than the slump in trade during the global financial crisis of 2008.