In a presentation live-streamed on Tuesday, April 14, International Monetary Fund (IMF) Chief Economist Gita Gopinath GS ’01 predicted that 2020 will see the most significant reduction in global economic output since the Great Depression, as the world battles the COVID-19 pandemic.
In its 2020 World Economic Outlook (WEO), also released on Tuesday, the IMF projected the world economic output to decline by 3 percent this year, easily surpassing the 0.1-percent shrinkage brought about by the Great Recession in 2009.
The report indicated that the global economy is expected to recover by 2021 with a growth rate of 5.8 percent. However, the WEO also acknowledged that its forecast is clouded by “extreme uncertainty.”
“This is a crisis like no other, which means there is substantial uncertainty about the impact that it will have on peoples’ lives and livelihoods,” said Gopinath in a virtual IMF press conference, in which she presented the content of the 2020 WEO. “A lot will depend on the epidemiology of the virus, the effectiveness of containment measures, and the development of therapeutics and vaccines, variables which are very hard to predict.”
The report expects the economic output of advanced economies to drop by 6.1 percent and for that of emerging markets and developing economies to shrink by 1 percent.
“For the first time since the Great Depression, both advanced economies and emerging and developing economies are in recession,” Gopinath remarked.
The IMF still expects China and India, two developing economies with the largest populations in the world, to maintain positive but greatly reduced economic growth rates for 2020 at 1.2 percent and 1.9 percent, respectively.
According to the report, the United States will experience a 5.9% decline in real GDP. The combined economic outputs of the eurozone will contract by 7.5 percent, and Greece will face the most severe economic recession at a decline of 10 percent, followed by Italy with 9.1 percent, and Latvia with 8.6 percent.
Other large European economies are all predicted to see significant declines in their real GDP in 2020, including the United Kingdom at 6.5 percent, Germany at 7 percent, and France at 7.2 percent.
The loss of global GDP could total at as much as $9 trillion — a sum greater than the combined GDPs of Japan and Germany, representing the third and fourth largest economies in the world, respectively.
Gopinath indicated that the economic forecasts outlined in the 2020 WEO could worsen if the pandemic is not ameliorated by the year’s end or grows more severe, due in part to the economic consequences of what the IMF has deemed “the Great Lockdown.”
“The pandemic may not recede in the second half of this year, leading to longer containment periods, worsening financial conditions, and further breakdowns in global supply chains,” Gopinath explained. “In such cases, global GDP will fall even further by an additional 3 percent in 2020, and if the health crisis rolls over into 2021, it can reduce the level of global GDP by an additional 8 percent.”