The International Monetary Fund has warned that the global economy is poised for a severe recession that will be the worst since the Great Depression of the 1930s, as the Coronavirus or Covid-19 caused the deaths of thousands of people, and the containment measures that were adopted to slow the outbreak severely impeded economic activity. The Fund said in its latest report on the global economic outlook, that global gross domestic product is set to contract by 3 percent this year, thanks to closures imposed by countries all over the world. The lender expects global GDP to grow 5.8 percent next year. In the January WEO update, the International Monetary Fund expected global growth of 3.3 percent this year and growth of 3.4 percent next year. In 2019, the global economy grew 2.9 percent.
These expectations are based on a scenario that assumes that the epidemic will fade in the second half of 2020 and containment measures can be phased out gradually with the normalization of economic activity. The International Monetary Fund warned that "the risks of even more serious consequences are great."
In this context, the chief economist of the International Monetary Fund, Gita Gopinath, said in the introduction to the report: "It is very likely that the global economy will witness its worst recession since the Great Depression this year, exceeding what it witnessed during the global financial crisis a decade ago."
Gopinath added that the more severe results are likely, and that "if epidemic and containment measures continued for a longer period of time, emerging and developing economies are going to be more severely affected, or difficult financial conditions will persist."
China, where the Covid-19 pandemic began, is expected to grow with a modest 1.2 percent this year, but is recovering with growth rising 9.2 percent next year. All developed economies are expected to record sharp declines in gross domestic product this year. The advanced economies as a whole are expected to shrink 6.1 percent this year and grow 4.5 percent next year.
The US economy is expected to contract by 5.9 percent this year, but it may grow by 4.7 percent in 2021. The country is one of the worst regions affected by the coronavirus outbreak.
The Eurozone is expected to see a 7.5 percent drop in gross domestic product this year. In 2021, the Eurozone economy is expected to grow by 4.7 percent. Italy, Spain and France are among the worst affected member states in the Eurozone. Italy is expected to record a 9.1 percent drop in gross domestic product this year, the worst result in the developed world.
In Asia, the Indian economy is expected to grow by 1.9 percent this year, a sharp slowdown from growth of 4.2 percent recorded last year. Next year, India's gross domestic product is expected to jump by 7.4 percent.