IMF predicts global recession in 2020 but struggles to determine extent - France 24

Washington (AFP)

"This crisis is unlike any other": by announcing Tuesday a global recession of 3% this year, the IMF warned that it could be much worse while recognizing the difficulty of making economic forecasts as the uncertainty is "considerable" .

"The world has changed dramatically in three months," said Gita Gopinath, the chief economist of the International Monetary Fund, describing "a grim reality" at a virtual press conference detailing the latest global economic outlook.

"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 worse 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.

The new coronavirus left China in late December before spreading around the world.

As of Tuesday, the Covid-19 had left nearly 120,000 people dead and almost 2 million people had been diagnosed in 193 countries and territories since the start of the epidemic, according to a report compiled by AFP from official sources.

In an effort to stem the pandemic, governments have resolved to confine their populations, shut down non-essential businesses, drastically reduce air traffic, crippling 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.

- Europe, the most affected -

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 there is little social safety net and where the health system is failing, the contraction in GDP should be 5.9%. "The recession is deep (...) It will leave its mark" in the world's leading economy, warned Gita Gopinath.

In the euro zone, GDP will even plummet by 7.5%. In Italy, the contraction will be -9.2%, in Spain of -8%.

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%. A public institute has reported a potential fall of 13%.

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).

- Rebound in 2021? -

The rebound in the world economy could however occur as early as 2021, with growth expected 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.

"Despite the dire circumstances," there are reasons to be optimistic, she said.

In the countries most affected, the number of new cases decreases, after the implementation of solid social distancing practices.

The scientific community is working at an "unprecedented rate" to find treatments and vaccines.

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.

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 moment, 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.

© 2020 AFP