The International Monetary Fund has predicted a serious economic realities, following the lockdown directives accross the world.
The body also predicted that economy contraction and recovery would be worse than anticipated if the coronavirus lingers longer.
While making the prediction on Tuesday April 14, 2020, IMF estimated that global gross domestic product will shrink 3% this year.
It added that when compared to a January projection of 3.3% expansion, it would likely mark the deepest dive ever.
“While the fund anticipated growth of 5.8% next year, which would be the strongest in records dating back to 1980, it cautioned risks are tilted to the downside. Much depends on the longevity of the pandemic, its effect on activity and related stresses in financial and commodity markets. ” IMF chief economist Gita Gopinath said.
“Even if the IMF’s forecast proves accurate, it said output in both advanced and emerging markets would undershoot their pre-virus trends through 2021, seemingly dashing any lingering hopes of a V-shaped economic rebound from the health emergency. The cummulative loss in global GDP this year and next could be about $9 trillion- bigger than the economies of Japan and Germany combined,” Gopinath said.
“This is a crisis like no other, which means there is substantial uncertainty on the impact it will have on people’s lives and livelihoods,” he added in an online briefing.
In its predictions, the IMF feels that countries experiencing severe epidemics will lose about 8% of working days this year during containment and restrictions.
In a further sign of pessimism, the IMF sketched out three alternative scenarios in which the virus lasted longer than expected, returned in 2021 or both.
“A lengthier pandemic would wipe 3% off GDP this year compared to the baseline, while protraction plus a resumption next year would mean 8% less output than projected in 2021.
“Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital-flow reversals and a collapse in commodity prices,” the IMF said.
The IMF added that fiscal measures will need to increase if stoppages to economic activity persist, or if the pickup in activity once restrictions are lifted is too weak. Economies with financing constraints may also require external support, the fund said. Georgieva had repeatedly pledged to use the IMF’s $1 trillion in loan capacity to help its members.
