IMF predicts global contraction on par with Great Depression
Economic recovery is expected in 2021.
A closed sign hangs in the window of a shop in Portsmouth, N.H. | Charles Krupa, File/AP Photo
By ADAM BEHSUDI
04/14/2020 09:34 AM EDT
Updated: 04/14/2020 10:19 AM EDT
The global economy is expected to contract by 3 percent in 2020 as a result of the coronavirus pandemic, the International Monetary Fund predicted in its annual World Economic Outlook released Tuesday.
"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," IMF Economic Counsellor Gita Gopinath wrote in the report. "The Great Lockdown, as one might call it, is projected to shrink global growth dramatically."
Economic recovery is expected in 2021, but the extent of any new growth will likely depend on the duration of the pandemic and policies that governments take to stimulate the economy.
If the pandemic fades in the second half of this year, the world economy is projected to grow by 5.8 percent in 2021 with the help of government support.
U.S. economic output is expected to contract by 5.9 percent in 2020 but could see 4.7 percent growth in 2021. Global trade in goods and services is expected to drop 11 percent this year but could increase by 8.4 percent next year.
"Countries urgently need to work together to slow the spread of the virus and to develop a vaccine and therapies to counter the disease," the report said. "Until such medical interventions become available, no country is safe from the pandemic (including a recurrence after the initial wave subsides) as long as transmission occurs elsewhere."
Also Tuesday, finance ministers and central bank governors representing G-7 nations met virtually and "reiterated their pledge to do whatever is necessary to restore economic growth and protect jobs, businesses and the resilience of the financial system," according to a summary of the meeting released by the Treasury Department.
The officials discussed the need to assist emerging and developing countries during the crisis, calling for more contributions to various IMF relief funds.
The ministers also agreed to provide a temporary suspension on debt service payments on bilateral financing provided to poorer countries as long as the broader G-20 agrees to a similar measure.
"Ministers and governors recognize that an extraordinary and well-coordinated international response is critical to reducing the depth of the crisis," the summary said.