IMF says coronavirus ‘Great Lockdown’ recession would be steepest in a century

The International Monetary Fund said the global economy is expected to shrink by 3.0% in 2020, the steepest downturn since the Great Depression

The world is likely to lose a cumulative US$9 trillion in output over two years – greater than the combined GDP of Germany and Japan

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An empty Plaza Mayor square in Madrid, Spain. Photo: AP

Published: 9:32pm, 14 Apr 2020Updated: 9:32pm, 14 Apr 2020

The global economy is expected to shrink by 3.0 per cent during 2020 in a stunning coronavirus-driven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s, the International Monetary Fund said on Tuesday.

The IMF, in its 2020 World Economic Outlook, predicted a partial rebound in 2021, with the world economy growing at a 5.8 per cent rate, but said its forecasts were marked by “extreme uncertainty” and that outcomes could be far worse, depending on the course of the pandemic.

“This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit,” IMF chief economist Gita Gopinath said in a statement.

Under the Fund’s best-case scenario, the world is likely to lose a cumulative US$9 trillion in output over two years – greater than the combined GDP of Germany and Japan, she added.

The IMF’s forecasts assume that outbreaks of the novel coronavirus will peak in most countries during the second quarter and fade in the second half of the year, with business closures and other containment measures gradually unwound.

A longer pandemic that lasts through the third quarter could cause a further 3 per cent contraction in 2020 and a slower recovery in 2021, due to the “scarring” effects of bankruptcies and prolonged unemployment. A second outbreak in 2021 that forces more shutdowns could cause a reduction of 5 to 8 percentage points in the global gross domestic product baseline forecast for next year, keeping the world in recession for a second straight year.