“This crisis is like no other”: the IMF predicts a global recession in 2020

«Cette crise ne ressemble à aucune autre»: le FMI prévoit une récession mondiale en 2020

Photo: Justin Tallis Agence France-Presse
The IMF forecasts a decline of 11% in the volume of exchange of goods and services in 2020.

“This crisis is not like any other” : in announcing Tuesday a global recession of 3% this year, the IMF has warned that this could be even worse while recognizing the difficulty of making economic forecasts as the uncertainty is ” significant “.

“The world has radically changed in three months […] We face a grim reality “, a summary Gita Gopinath, the chief economist of the international monetary Fund in the latest report on global economic prospects.

“It is very likely that this year, the global economy will experience its worst recession since the Great Depression” of 30 years and will surpass that of the global financial crisis, she added.

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The new coronavirus is party of China in late December, before spreading rapidly across the world.

On Tuesday, the epidemic of COVID-19 had almost 120 000 people dead and almost 2 million people had been diagnosed in 193 countries and territories since the beginning of the epidemic, according to a report drawn up by AFP from official sources.

In an effort to stem the pandemic, the government resolved to confine their population, close to shops non-essential, to reduce to a trickle the air-traffic paralyzing whole sectors of the economy.

As a result, the international trade collapsed : the Fund now expects a decline of 11 % in the volume of exchange of goods and services in 2020.

While in the economic crises the usual, policy makers are striving to boost as fast as possible the economic activity by stimulating demand, this time, “the crisis is in large measure the result of the containment measures required,” says Gita Gopinath.

For the advanced countries, the recession is expected to reach 6.1 %.

In the United States, where there are few social safety nets and where the health system is failing, the contraction of GDP is expected to be 5.9 %.

In the euro area, the GDP will even fall down 7.5 %, with some populations in Italy, Spain and France hit by the coronavirus.

In the area of Latin America and the Caribbean, the recession will be slightly less marked (-5,2 %).

For the Middle East and central Asia, the IMF anticipates a decline in GDP of 2.8 %.

China and India are expected to pull their pin of the game with respective growth rates of 1.2 % and 1.9 %.

The rebound of the global economy, however, could occur as early as 2021, with an expected growth of 5.8 % on the condition that the pandemic is effectively brought under control in the second half of this year.

Otherwise the recession could be much worse, a hypothesis ” very likely “, warned the chief economist.

Reasons to be optimistic

“Despite the circumstances, disastrous “, there are many reasons to be optimistic, she elected.

In the worst-affected countries, the number of new cases decreases, after the implementation of solid practices social distancing.

The scientific community is also at an “unprecedented rate” to find treatments and vaccines.

On the economic front, the IMF praises the “quick and substantial” to protect people and businesses in the most fragile.

In addition, continuing Gita Gopinath, “the crucial difference” with the crisis of the 30s is the existence of multilateral institutions such as the IMF and the world Bank are able to provide immediate financial assistance to help the most vulnerable countries.

Of further fiscal measures will, however, be necessary if the termination of the activity had to persist and if the economic rebound proves too weak once the draconian measures lifted.

For a number of emerging or developing economies, the bilateral creditors of advanced economies and the international financial institutions will help.

While the pandemic has highlighted the lack of preparedness of many countries to a health crisis of this magnitude, the IMF urges them to reflect on the measures that could be adopted to avoid that a pandemic similar does not recur in the future.

It recommends in particular that an exchange of information more important and more automatic on the unusual infections, as well as the constitution of stocks of personal protective equipment and the establishment of protocols for that country are not faced with problems of supply of health facilities essential.

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