The International Monetary Fund (IMF) has warned that the “Great Lockdown” of 2020 due to the coronavirus pandemic will result in the worst worldwide recession since the Great Depression of 1929-33.
In its new World Economic Outlook, the IMF has shaved growth forecasts in all major economies as well as in the majority of emerging countries. Low-income nations in Africa, Latin America and Asia will be especially hard hit.
The global economy is anticipated to slump 3 percent in 2020, including a 5.9 decline in the U.S., a 7.5 percent contraction in the euro area, and a 6.5 drop percent in the U.K. In January, the IMF had forecast gross domestic product (GDP) to grow 3.3 percent.
“This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods,” Gita Gopinath, the IMF’s chief economist, said in a blog post about the outlook report on Tuesday (April 14). “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.”
U.S. unemployment is anticipated to reach 10.4 percent in 2020 and 9.1 percent in 2021, according to the IMF.
The IMF forecast global GDP growth in 2021 will be 5.8 percent, up from 3.4 percent but coming from a lower base following the projected contraction.
“A partial recovery is projected for 2021, with above-trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound,” Gopinath said.
Gopinath also highlighted the hit to the retail, hospitality, transport and tourism industries and the effect on the self-employed and small and medium-sized businesses (SMBs).
A new PYMNTs poll of more than 700 SMBs confirms the problem level. Some 26 percent of SMBs surveyed didn't expect their companies to survive the coronavirus-related shutdown, while another roughly 33 percent weren't sure they'd make it through. You can read more of our survey results here.
As the IMF's Gopinath put it: “This is a truly global crisis as no country is spared. Countries reliant on tourism, travel, hospitality and entertainment for their growth are experiencing particularly large disruptions."
The IMF has $1 trillion in lending capacity and of its 189 members, more than 90 of them have asked for financial support.
“We are actively deploying our 1-trillion-dollar lending capacity to support vulnerable countries, including through rapid-disbursing emergency financing and debt service relief to our poorest member countries, and we are calling on official bilateral creditors to do the same,” she said.
Consumers have shifted to shopping online but are spending less than they were before the pandemic due to economic anxiety, according to a recent PYMNTS survey.