The global economy is set to contract 3 percent this year, thanks to the lockdowns imposed by countries across the world to slow the spread of the coronavirus, or Covid-19, pandemic that has claimed thousands of human lives, the International Monetary Fund said in its latest World Economic Outlook report, released Tuesday.
The lender expects the global GDP to grow 5.8 percent next year. These projections are based on a scenario that assumes the pandemic will fade in the second half of 2020 and the containment measures can be gradually unwound as economic activity normalizes.
“The risks for even more severe outcomes, however, are substantial,” the IMF warned.
“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,” IMF chief economist Gita Gopinath said in the foreword to the report.
More severe outcomes are likely “if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment,” Gopinath said.
China, where the Covid-19 pandemic started, is forecast to grow a modest 1.2 percent this year, but rebound with a growth surge of 9.2 percent next year.
All advanced economies are expected to log severe declines in GDP this year.
The US economy is expected to contract 5.9 percent this year, but grow 4.7 percent in 2021. The country is one of the worst hit by the coronavirus outbreak.
Eurozone is projected to witness a GDP decline of 7.5 percent this year. In 2021, the euro area economy is forecast to grow 4.7 percent.
Italy, Spain and France are among the worst hit euro area member states. Italy is forecast to log a GDP decline of 9.1 percent this year, the worst outcome in the developed world.
In Asia, the Indian economy is expected to grow 1.9 percent this year, a sharp slowing from the 4.2 percent expansion logged last year. Next year, GDP is expected to jump 7.4 percent.