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“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,” Gita Gopinath, the IMF’s chief economist, said in the 2020 World Economic Outlook report.
It would also dwarf the 0.1 percent contraction in 2009 during the financial crisis. By comparison, in January, the IMF forecast a global GDP of 3.3 percent for the year.
The IMF predicted a partial rebound in 2021, with the world economy growing at a 5.8 percent rate. Still, it cautioned that its forecasts were plagued by "extreme uncertainty," dependent on whether the virus fades in the second half of 2020 and if policy actions are effective in preventing widespread bankruptcies, extended job losses and system-wide financial strains.
Under the Washington-based organization's best-case scenario, the cumulative loss to global GDP over 2020 and 2021 could be about $9 trillion -- larger than the economies of Japan and Germany, combined. If the dual health and economic crises continue, the IMF said global GDP will plummet by an additional 8 percent in 2021.
To contain the spread of COVID-19, the respiratory disease caused by the novel coronavirus, governments throughout the world have imposed strict lockdown measures, directing citizens to only leave their houses for activities deemed "essential," like grocery shopping.
The result, which the IMF dubbed the "Great Lockdown," has been a global economy that's nearly paralyzed as businesses shutter their doors.
“This crisis is like no other,” Gopinath wrote in the report. “Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”
According to the latest forecasts from the IMF, the U.S. economy will contract by 5.9 percent this year, compared with a 2 percent growth expectation in the January outlook. The European Union, meanwhile, could see growth drop by 7.5 percent. But China, the first nation to be struck by the virus, is expected to grow by 1.2 percent this year.
“Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital-flow reversals and a collapse in commodity prices,” the IMF said. “Risks of a worse outcome predominate.”
The report precedes the IMF's spring meeting this week, which will be held via video conference for the first time ever.