IMF: Coronavirus pandemic pushing global economy into deepest recession

As the deadly coronavirus pandemic has affected 210 countries and territories around the world, the International Monetary Fund, on April 15, said that the outbreak is also pushing the global economy into its deepest recession. While speaking to international media reporters, IMF chief economist Gita Gopinath warned that that pandemic has already cut world output by three per cent this year and it could get worse. She also informed that the downturn will slash $9 trillion from the world economy. 

While the virus has led to unemployment in several sectors and also led to shutting down of the global economy, the IMF reportedly said that even if it is contained and economies begin operating again, 2021 should see a rebound of 5.8 per cent. However, the organisation also said that it is still difficult to make an accurate prediction due to the changing situation. Further, the IMF also warned that there are ‘severe risks of a worse outcome’ due to the ‘extreme uncertainty around the strength of the recovery. 

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‘The Great Lockdown’ 

Gopinath reportedly said that the cumulative loss of global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion, which is greater than the economies of Japan and Germany combined. She added that ‘much worse’ growth outcomes are possible and maybe even likely if the pandemic and containment measures last longer or if the widespread scarring effects emerge due to firm closures and extended unemployment. The IMF also the situation ‘The Great Lockdown’ and informed that the global downturn is worst since the Great Depression of the 1930s. 

Furthermore, the organisation predicted that this year, the only economies that are expected to be spared from the recession are China and India, however, they added that even those countries will only see relatively low growth of 1.2 per cent and 1.9 per cent respectively. The organisation also predicted that the advanced economies could be shrunk by six per cent in 2020. IMF projects that the US economy could contract by 5.9 per cent and drops of 7.3 per cent in France and 6.5 per cent in Britain is also predicted. 

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The IMF reportedly said that the severe slowdown is ‘unavoidable’, however, they added that substantial targeted fiscal, monetary and financial measure can soften the blow. Gopinath also said that once the recovery happens and the world is past the pandemic phase for advanced economies, it would be essential to undertake a broad-based final stimulus. She added that the spending would be more effective if it were coordinated across all the advanced economies of the world. 

It is believed that synchronised actions can magnify the impact but also can avoid some the errors of the past century when countries adopted ‘futile mercantilist policies’. The organisation has predicted that the inevitable massive spending will lead to a sharp increase in government debt and deficit levels. However, Gopinath reportedly said that if the recovery begins in 2021 and with low-interest rates, the combination should help in bringing down debt levels slowly over time. 

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