The global economy will shrink by three per cent in 2020 as coronavirus triggers the worst economic collapse since the Great Depression, the International Monetary Fund (IMF) said today.
Although the IMF said growth will rebound in 2021 to 5.8 per cent, it said predictions were uncertain and the size of the recovery will depend on how long the coronavirus pandemic lasts.
A longer pandemic could have a “scarring” effect on the global economy, the IMF said, as unemployment and company failures take a heavy toll.
Even if coronavirus peaks in the second quarter and fades in the second half of the year, the world is set to lose $9 trillion (£7.2 trillion) in output over two years.
“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,” the IMF said in its report.
“The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”
IMF chief economist Gita Gopinath said that although growth would rebound somewhat, “this recovery in 2021 is only partial”.
“The level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit,” she said.
The IMF, the Washington-based international lender of last resort, dramatically downgraded its growth forecasts from January.
At the start of the year, it thought the global economy would grow 3.3 per cent in 2020 as trade tensions between the US and China eased.
Now it thinks the US economy will contract 5.9 per cent in 2020, with a rebound of 4.7 per cent growth in 2021.
The UK economy is set to contract 6.5 per cent this year, the IMF said. It will then rebound to four per cent growth in 2021.
This forecast was more optimistic than the scenario produced today by the UK’s Office for Budget Responsibility, which said GDP could shrink 12.8 per cent in 2020.
Eurozone economies will contract by 7.5 per cent in 2020, Italy seeing its GDP fall 9.1 per cent. The Fund said Germany would contract seven per cent and France 7.2 per cent.
Chinese growth will remain positive at 1.2 per cent, although this is down from a previous six per cent growth prediction.