IMF: The world will face the worst recession as the global economy will contract by 3%
As per the International Monetary Fund (IMF), the world is likely to experience the worst recession since the 1930s. The global economy will suffer the worst financial crisis as the Governments around the globe are grappling with the COVID-19 pandemic. The global economy is likely to shrink by 3% in the year 2020 due to the coronavirus pandemic globally that was first identified in China in the year 2019.
Emerging and Developing Economies
As per the growth projections presented by IMF, the emerging and developing economies will face challenges due to the coronavirus pandemic. The economies of emerging and developing economies will hit by 1% in the year 2020. Countries with low income will have to deal with the health crisis and systems as they are not strong enough to withstand the pandemic.
Developing economies that are highly dependent on tourism will be hit hard and low-income countries where the large population depends on daily wages to survive to require immediate intervention. Emerging and developing economies such as China, India, etc. will be in a better position as compared to the advanced economies.
Emerging and developing economies of Asia such as China and India are expected to grow by 1.2% and 1.9% in the year 2020. Economies in the Middle East and North Africa are expected to contract 3.3% this year.
Other regions such as sub-Saharan Africa, Latin America and the Caribbean will contract 1.6% and 5.2% respectively this year. The countries exporting oil will also be hit hard due to the lower revenues, belt-tightening and lower growth.
Advanced economies will be contracted by 6.1% in the year 2020. These economies are expected to hit hard as most of them are suffering from the worst outbreaks of the global pandemic. As per the report projected by IMF, the US economy will contract by 5.9% while the eurozone is expected to contract by 7.5%.
Economies of Germany and France is expected to shrink by 7% and 7.2% respectively. In Italy and Spain, the economy is expected to contract by 9.1% and 8%, respectively as these countries are the worst hit in Europe by COVID-19.
Great Depression vs. Great Lockdown
As per Geeta Gopinath, IMF's Chief Economist, the world is better off on the health front in comparison to the Great Depression. While on the economic front, it makes a big difference as there are lenders of last resort, monetary policy is proactively able to come in and ensure enough liquidity in markets, fiscal policy is able to play a major role in supporting firms and households. She further stated that the IMF is expecting a partial recovery by the year 2021, provided that the global pandemic eases this year.
Geeta Gopinath on Great Lockdown stated that this is a crisis like no other which means there's substantial uncertainty about the impact it will have on people's lives and livelihoods. The magnitude and speed of collapse in the activity that has followed (the lockdown) is unlike anything we’ve experienced in our lifetimes.
Inequality can go up:
IMF stated that since the global pandemic, it has received an unprecedented number of calls for emergency funding. Out of 189 members, over 90 members have asked for financial support.
As per Geeta Gopinath, the world is facing the worst recession since the 1930s. This clearly states that people at the lower level will face a tremendous loss of income, so poverty will rise and inequality can go up.
World Economic Outlook Reports:
World Economic Outlook reports are published twice in a year, in the months of April and October. The reports present an analysis of global economic developments during the near and medium-term by IMF staff economists'. The report presents a detailed analysis of the world economy, issues affecting industrial countries, developing countries and economies in transition to market and the topics of current interest.
About International Monetary Fund (IMF)
1- IMF was formed on December 27, 1994, at the Bretton Woods Conference by the ideas of Harry Dexter White and John Maynard Keynes.
2- IMF headquarters is located in Washington DC, US.
3- Currently, 189 countries are members of the IMF. India joined the IMF in the year 1945.
4- English is the official language of the IMF.
5- Currently, the Managing Director of IMF is Kristalina Georgieva and Chief Economist is Gita Gopinath.
6- Parent Organization of IMF is the United Nations.
Due to the global pandemic, global trade may face a loss of 9 trillion USD. If the crisis continues in the second half of this year (after June), an additional 3% fall is expected in the global GDP.