IMF predicts 3% drop in global economy, worst shock since Great Depression

The global lockdown, imposed to curb the spread of new coronavirus, has crippled the global economy. According to International Monetary Fund’s April World Economic Outlook due to the pandemic outbreak the global economy output is set to drop by 3%. It is the biggest fall the world economy would ever witness since the Great Depression.  

The current scenario makes the global meltdown 2008-2009, when the global output got reduced by 0.1%, look bearable.

WEO presented the 3% slump in economic growth as a best case scenario, while the in worst case it forecasted 11% dive in the output. The organisation predicted three scenarios – one, where 2020 lockdown could extend 50% longer than forecasted; two reemergence the milder version of the virus in 2021; and third an extended pandemic and a longer shut down.

In IMF’s economic counsellor, Gita Gopinath’s opinion pulling the plug on global economic activity for an uncertain timeframe, as a preventive measure to combat Covid-19, has triggered a crisis “like no other”.

She added: “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. ‘The Great Lockdown’, as one might call it, is projected to shrink global growth dramatically.”

As per IMF’s recent forecast, the world would be put back on the road to recovery by next year but it would be a slow recovery.  Gopinath said that the it would not be easy for nations to crawl back out of the economic slump as level of nations’ GDP would be less than the pre-virus times. Italy, Spain, France, Germany and US are believed to be the ones to face the biggest GDP drop.

She warned: “Much worse growth outcomes are possible and maybe even likely.”

The organisation anticipates worst to come in the second quarter of 2020 for all the nations. But China is believed to be an exception in this scenario as it already bore the maximum brunt of corona shutdown in its first quarter.

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