IMF warns of a widespread global economic recession due to COVID-19

The global real GDP could fall 3% year-on-year in 2020, much higher than the 0.1% YoY drop during the 2009 financial crisis

IMF warns of a widespread global economic recession due to COVID-19 [representative image]
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IMF warns of a widespread global economic recession due to COVID-19 [representative image]

The International Monetary Fund (IMF) has warned of a widespread global economic recession in light of the worldwide lockdowns necessitated as part of precautionary measures to curb the spread of the coronavirus outbreak (COVID-19).

“We expect the worst economic downturn since the Great Depression experienced in the 1930s,” the IMF managing director, Kristalina Georgieva-Kinova, said.

The latest update of the World Economic Outlook in April has projected global real GDP to fall 3% year-on-year in 2020, which is significantly higher than the 0.1% drop in global real GDP during the global financial crisis of 2009.

Provided the world witnesses a gradual recovery from the pandemic in the second half of 2020, and provided policy measures are taken globally to prevent bankruptcies, extended job losses, and system-wide financial strains, the IMF predicts a partial recovery in 2021.

However, economic activity will take a hit as cumulative losses to global GDP during 2020 and 2021 is expected to be approximately $9tn, which is greater than the economies of Japan and Germany, combined.

The IMF has projected that the COVID-19 pandemic will severely impact growth across all regions, with the real GDP of advanced economies expected to fall 6.1% year-on-year in 2020, and the real GDP of developing economies and emerging markets expected to fall by 1% YoY in 2020.

The IMF has begun to actively deploy its $1tn lending capacity to support vulnerable countries, including through rapid-disbursing emergency financing and debt service relief to its poorest member countries.

the IMF Executive Board has also approved immediate debt relief for 25 countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT).

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