World faces worst recession since Great Depression, IMF says

World faces worst recession since Great Depression, IMF says
The world economy is going to see a great recession. Source: Getty Images
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Daily US Times: The International Monetary Fund says the global economy will contract by 3% this year as countries around the world shrink at the fastest pace in decades. The IMF described the global decline as the worst since the Great Depression of the 1930s.

The Fund also added that a prolonged outbreak would test the ability of central banks and governments to control the crisis.

IMF’s chief economist, Gita Gopinath, said the crisis could knock $9 trillion (£7.2 trillion) off global GDP over the next two years.

‘Great Lockdown’

While the Fund’s latest World Economic Outlook praised the “swift and sizeable” response in countries like The US, the UK, Japan, and Germany, it said no country would escape the downturn.

It expects global growth to rebound to 5.8% next year if the current coronavirus pandemic fades in the second half of 2020.

Today’s “Great Lockdown” presented a “grim reality”, said Mr Gopinath, ”for policymakers, who faced severe uncertainty about the duration and intensity of the shock.”

She said: “A partial recovery is projected for 2021. But the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound.”

“Much worse growth outcomes are possible and maybe even likely,” she added.

Sharpest UK downturn in a century

UK economy will shrink by 6.5% in 2020, according to IMF’s prediction, compared with its January forecast for 1.4% GDP growth.

A decline of this magnitude would be bigger than the 4.2% drop in output seen in the wake of the financial crisis.

According to reconstructed Bank of England data dating back to the 18th century, it would also represent the biggest annual fall since 1921.

Global pain

Ms Gopinath said that for the first time since the Great Depression, both developing and advanced economies were expected to fall into recession.

The International Monetary Fund warned that growth in advanced economies would not get back to its pre-virus peak until at least 2022.

The US economy is expected to contract by 5.9% this year, representing the biggest annual decline since 1946. Unemployment in the US is also expected to jump to 10.4% this year, a record high.

A partial recovery is expected in 2021, with expected US growth of 4.7%.

It is expected that as depression is coming, the Chinese economy will expand by just 1.2% this year, which would be the slowest growth since 1976. Australia is also expected to suffer its first recession since 1991.

The IMF warned that there were “severe risks of a worse outcome”.

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