International Monetary Fund (IMF) Expects the Worst Economic Downturn since the Great Depression
In mid-April 2020 the International Monetary Fund (IMF) released its latest ‘World Economic Outlook’ report. It is in fact not a complete report. Considering the global economy has changed dramatically over the past months, the IMF’s previous update of the World Economic Outlook (released in January 2020) simply had no validity anymore, and therefore the IMF released one new chapter in mid-April 2020 (with the full report set to follow in May 2020).
The contents of the IMF’s latest update was big news around the world. Yes, analysts had expected to see a global recession in 2020, possibly even a quite deep one. But few actually dared to put their forecasts in precise numbers and figures. This indeed makes sense considering we are in unchartered waters. The world has not seen the type of lockdowns and restrictions that have been imposed in 2020 to combat the coronavirus (COVID-19) outbreak, especially not on such a large scale. Moreover, it remains unknown for how long these measures will last (which makes it basically impossible to set an accurate forecast for economic growth in 2020, and beyond).
Nonetheless, the IMF released an important new update in which it states its revised projections based on a baseline scenario (assuming that the COVID-19 pandemic is to fade in the second half of 2020, therefore allowing the containment efforts to be gradually unwound in Q3 and Q4, and thus economic activity to rebound).
The IMF believes the global economy will contract sharply, by minus 3 percent year-on-year (y/y) in 2020 as a result of the pandemic (thereby being a much bigger crisis for the global economy than the 2008–2009 financial crisis). However, The IMF also expects a strong rebound after most, or all, restrictions have been removed. Hence, the IMF set a 5.8 percent (y/y) growth pace for the global economy in 2021.
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