(Newswire.net — April 16, 2020) — The world economy will see a three percent decline this year, with many countries facing the biggest economic problems in recent decades, according to the International Monetary Fund, BBC’s business reporter Szu Ping Chan reports.
The IMF said that the economic downturn was the worst since the Great Depression of the 1930s.
They say the pandemic has taken the world into a “crisis like no other”.
If the pandemic lasts too long, it will test the ability of governments and central banks to control the crisis, they added.
Gita Gopinath, the IMF chief economist, says the crisis could reduce the world’s social product by $9 trillion of global GDP over the next two years.
Great Lockdown
Although the IMF praised the “swift and sizeable” response in countries such as the UK, Germany, Japan, and the US, it states that no country will be immune to the economic downturn following the pandemic and the isolation measures brought on to combat it.
If the pandemic ends in the second half of 2020, global growth is expected to recover by 5.8 percent next year.
Ms. Gopinat says the big economic blockade represents a “black reality” for politicians, who face “uncertainty about the duration and intensity of the shock.”
“Partial recovery is projected for 2021,” says Ms. Gopinath, adding that a big economic blockade represents a “grim reality” for politicians.
Global pain
MsGopinat states that for the first time since the Great Depression developed economies are expected to be in recession.
IMF warns that growth in developed economies will not return to pre-viral levels until 2022.
The US economy will see a 5.9 percent decline this year, the highest annual decline since 1946. At the same time, unemployment is expected to jump to 10.4 percent.
A partial recovery in the US is expected in 2021, up from 4.7 percent.
China’s economy has seen a growth of just 1.2 percent this year – the lowest since 1976 – and Australia is facing its first recession since 1991.
The IMF warns that there are serious risks of even worse outcomes.
If more time is needed to curb the pandemic and another wave hits in 2021, the global gross domestic product will fall by another eight percent.
The IMF said that this scenario could be a big problem for economies with large debt because investors will not want to borrow money, which will increase borrowing costs. The IMF also points out that many developing countries will need debt relief in the coming months and years.
Economic remedy
Although quarantine diminishes economic activity, the IMF states that social distancing is a vital measure.
“Virus containment measures are key to slowing the spread and enabling health care systems to cope and help pave the way for faster and greater economic activity.”
“Uncertainty and reduced demand for services could be even worse in a scenario of greater spread without social distancing,” said the IMF while setting priorities for dealing with the pandemic.
The IMF says there are four priorities in the fight against the pandemic: They are seeking more money from health care systems, financial support for workers and jobs, ongoing central bank support, and clear recovery plans.
They are also asking the world to work together to find and distribute treatments and vaccines.