The International Monetary Fund (IMF) announced Tuesday a global recession of 3% this year, despite the "considerable" uncertainty around economic forecasts. "This crisis is unlike any other," admitted the institution.
With the Covid-19 epidemic, "the world has radically changed in three months," said Gita Gopinath, the chief economist of the International Monetary Fund, describing "a grim reality" at a virtual press conference. "It is very likely that this year the world economy will experience its worst recession since the Great Depression," she also added. It may be less bad than in the 1930s when world GDP fell by 10% but much more severe than in 2009 (-0.1%) following the financial crisis, she said.
Impossible restart, countries stopped
To stem the pandemic, governments have resolved to confine their populations, close non-essential businesses, drastically reduce air traffic, thus paralyzing whole swathes of the economy. As a result, international trade has collapsed: the Fund forecasts an 11% drop in the volume of trade in goods and services in 2020.
While in the usual economic crises, political decision-makers try to stimulate economic activity as quickly as possible by stimulating demand, this time, "the crisis is to a large extent the consequence of the necessary containment measures", notes Gita Gopinath.
For advanced countries, the recession is expected to reach 6.1%. In the United States, where the healthcare system is failing, the contraction in GDP should be 5.9%. In the euro zone, GDP will even plummet by 7.5%. In Italy, the contraction will be -9.2%, in Spain of -8%.
A rebound next year?
In France, with a 7.2% recession, the IMF is more optimistic than the government, which expects an 8% drop. Elsewhere in Europe, in the United Kingdom, the GDP will fall by 6.5%. In the Latin America and Caribbean region, the recession will be barely less marked (-5.2%). For the Middle East and Central Asia, the IMF expects a drop in GDP of 2.8%. China and India should be the only ones to create growth (+1.2% and +1.9% respectively).
Light at the end of the tunnel, a rebound in the world economy could however occur as early as 2021, with expected growth of 5.8%. Provided that the pandemic is effectively brought under control in the second half of this year. Otherwise the recession could be much worse, a "very likely" assumption, warned the chief economist.
On the economic front, the IMF praises "rapid and substantial" measures to protect the most vulnerable people and businesses. She stressed that "the crucial difference" with the crisis of the 1930s is the existence of multilateral institutions such as the IMF and the World Bank capable of providing immediate financial aid to help the most vulnerable countries. The G7 has also expressed support for the temporary suspension of debt services for poor countries.
Measures to prevent history from repeating itself
For advanced economies, economic recovery will require more fiscal stimulus. And this stimulus will be more effective if these measures are "coordinated", underlined Gita Gopinath. She further believed that the issue of state debt should be addressed once the pandemic is over. "For the time being, the crisis requires the action of governments," she insisted.
Finally, while the pandemic has highlighted the lack of preparedness of many countries for a health crisis of this magnitude, the IMF urges consideration of the measures that could be adopted to prevent a similar pandemic from recurring in the future. to come up. In particular, it calls for a more extensive and automatic exchange of information on unusual infections, as well as the building up of global stocks of personal protective equipment and the establishment of protocols so that countries do not face problems. supply of essential health equipment. "Despite the dire circumstances," there are reasons to be optimistic, said Gita Gopinath.
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