According to the International Monetary Fund, the fallout from the COVID-19 pandemic and corresponding efforts to contain it are likely to lead to the worst economic depression since the Great Depression.
“The magnitude and speed of collapse in activity” following “necessary quarantines and social distancing policies” implemented by countries around the world “is unlike anything experienced in our lifetimes,” wrote Gita Gopinath, Director of the IMF’s Research Department.
Specifically, the IMF’s April “World Economic Outlook” report predicts that global economic growth will fall to -3%. That’s a striking divergence from their last prediction, January 2020, which predicted the economy would grow 3.3%. It also predicts that the “Great Lockdown 2020” depression will be much worse than the Global Financial Crisis of 2009, which saw the global economy grow at -0.1%.
But, according to the IMF, it won’t last too long. Provided that the pandemic goes away in the second half of the year, and that government aid to businesses and workers prevents systemic financial strain, the Fund predicts that global growth in 2021 will rebound to 5.8%.
For the time being, though, nobody will be spared. The IMF notes that countries with developing economies and countries reliant on tourism and emergent markets will be hit particularly hard. “For the first time since the Great Depression, both advanced economies and emerging market and developing economies are in recession,” wrote Gopinath. By contrast, the global financial crisis of 2009 saw “emerging market and developing economies” continue to grow even as advanced economies suffered.
That’s all based on the IMF’s baseline model, which is based on advanced indications that the virus should become more contained as the year continues. “There are some hopeful signs that this health crisis will end,” wrote Gopinath, citing countries using social-distancing, testing and contract tracing to spurn COVID-19’s spread.