Pandemic effect: IMF predicts global economy to fall by 3% in 2020

The International Monetary Fund (IMF) predicts a global economic decline of 3% in 2020. Such data are contained in the report of the organization World Economic Outlook, published on Tuesday, April 14.

It is curious that back in January, IMF experts expected global GDP growth at the end of the year by 3.3%. Such a radical deterioration in the forecast, economists explained the negative consequences of the coronavirus pandemic.

“From 2020 to 2021, the total loss of global GDP from the viral crisis could be about $ 9 trillion — more than the size of the economies of Japan and Germany combined,” said Gita Gopinat, chief economist at the foundation.

According to her, the economic recession expected in 2020 may become the largest since the Great Depression of the 1930s. At the same time, global GDP may begin to recover already in 2021.

“Against the backdrop of the coronavirus pandemic in 2020, the global economy will decline sharply - by 3%. This is much worse than during the financial crisis of 2008-2009. Under the baseline scenario, according to which the pandemic will end in the second half of 2020 and it will be possible to gradually abandon efforts to (contain it. - RT ) containment, the global economy will grow by 5.8% in 2021, ”the report says.

According to official data of the World Health Organization (WHO), the total number of people infected with coronavirus infection COVID-19 in the world exceeds 1.8 million, of which more than 117 thousand died. The spread of the disease and quarantine measures introduced by the states provoked a massive reduction in trade and passenger traffic, said Sergey Suverov, senior analyst at BCS Premier, in an interview with RT.

“In 2009, world GDP fell only 0.1%, and the financial sector was the main hit. The starting point for the recession was the bursting bubble in the US mortgage market, and only then other industries began to experience difficulties. Now the crisis is associated with harsh quarantine measures due to the outbreak of COVID-19. Closing the borders weakened business activity, reduced the volume of transportation and thereby destroyed the logistics and technological chains, ”said Suverov.

According to him, the current state of affairs has led to a decline in global demand and trade. As a result, world trade can go down by almost a third. This is stated in the report of the World Trade Organization (WTO).

According to RT, Gennady Nikolaev, an expert at the Academy of Financial and Investment Management, managed to stop the recession in 2009 due to large-scale cash injections from global central banks. However, according to the expert, in the current conditions such a policy may turn out to be less effective.

“The previous economic fire was extinguished by large-scale cash injections, redemption of bad debts and cheap loans. Now there’s a shock in the proposal: similar actions by central banks in 2020 will not stop the spread of coronavirus, cancel quarantine and return people to work, ”the expert explained.

Risk zone

According to the IMF, in 2020 the GDP of developing countries may decline by 1%, while the economies of developed countries run the risk of slipping by 6.1%. In this case, the United States and Europe risk the most serious losses, according to the organization. So, experts predict a decrease in US GDP by 5.9%, and the eurozone - by 7.5%.

“The most vulnerable countries may be those whose economies are heavily dependent on global trade, the provision of services and financial flows. First of all, we are talking about the USA and Europe. Today, the States occupy about 15.1% of global GDP, and the eurozone - about 11%. Thus, the collapse of trade and demand both in the economy and in the international arena immediately hits them, ”said Mark Goikhman, TeleTrade’s chief analyst.

According to Gennady Nikolaev, countries with a minimum volume of reserves and a high level of debt burden are also in the risk zone. We are mainly talking about developing countries.

“In total, over 90 developing countries have applied for financial assistance to the IMF. The number of people below the extreme poverty line may increase by 500 million. It will be difficult for African and Middle Eastern countries, where there is a shortage of both money and medicines, ”Nikolaev said.

According to the IMF forecast, among developing countries, the most serious GDP may fall in Brazil (by 5.3%), Mexico (6.6%) and South Africa (5.8%). At the same time, the growth rates of such large economies as China and India will remain positive, but will slow down from 6.1% to 1% and from 4.2% to 1.9%, respectively.

On the same wave

As fund experts expect, Russia is also at risk of being affected by the general economic recession. In 2020, the country's GDP decline will be about 5.5%, but it will be weaker than in 2009 (7.9%). Moreover, already in 2021, the economy can grow by 3.5%.

According to Gennady Nikolaev, to a large extent the Russian economy was affected by a decline in consumer demand and a sharp collapse in oil prices in early spring. Meanwhile, the gradual restoration of commodity quotes, as well as the high volume of reserves, will mitigate the consequences of the recession for Russia.

“The accumulated liquidity reserves have already reached 18 trillion rubles. These funds should be enough to support the needy industries during a forced pause in production. In addition, after the renegotiation of the OPEC + deal, we see a moderate increase in oil prices, which have moved away from 20-year lows and are trading near $ 30 per barrel. The current state of affairs allows the country to feel more confident and actively spend money on the fight against the crisis, ”Nikolaev explained.

Moreover, the Russian authorities have already announced the introduction of measures to support business and the public. We are talking about increasing social benefits, providing credit vacations and deferring taxes for companies. According to Vladimir Putin, the amount of funds allocated by the government to combat the consequences of the epidemic is about 1.2% of GDP.

“The authorities provide benefits to small and medium-sized businesses, as well as support the unprotected segments of the population. Such a policy can reduce the negative consequences of the economic downturn and will allow it to return to growth in the coming years, ”concluded Sergey Suverov.