“Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”IMF’s chief economist, Gita Gopinath wrote on its semi-annual report
Earlier this week, the International Monetary Fund released a report predicting the impact on world economies of what it calls the ‘Great Lock-down recession.’
Working under the assumption that both the pandemic and its containment measures are likely to peak during the second quarter of 2020 for most countries in the world, global gross domestic product figures are expected to fall to -3 per cent this year.
Compared to an earlier January projection of 3.3 per cent growth, this represents a sharp drop of 6.3 percentage points over a very short period and will probably mark the deepest dive since the Great Depression, the report says.
The IMF expects the pandemic to fade in the second half of this year, with containment measures being gradually wound down in response.
“This crisis is like no other”, IMF’s chief economist, Gita Gopinath wrote. “Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”
Advanced economies will take the biggest blow, contracting 6.1 per cent, while emerging-market and developing economies will face a smaller drop of around 1 per cent. Though growth in China and India will decelerate, their economies could still manage to expand by 1.2 per cent and 1.9 per cent respectively, according to the report.
Global trade in goods and services is expected to take a tumble of around 11 per cent during this recession and the US unemployment rate could go from its lowest in half a century to an alarming 10.4 per cent. At the same time, central banks around the world have cut interests to around or below zero to cushion the impact on individuals and small enterprises.
More fiscal measures will be needed if stoppages to economic activity persist or if a return to business-as-usual proves slow. A pledge of 1 trillion dollars in loan capacity has been announced for economies with financing constraints, the report ends.
The future is in our hands
The numbers are looking grim, indeed. A frank and personal view is that, while we obviously must try to stay hopeful, perhaps it’s time to look beyond the borders of our individual nations.
Worldwide political manoeuvring to gain the upper hand in this pandemic has consumed enough hope and resources. More global co-operation will surely be needed next time we face a similar situation. And, as we now know for a fact that it’s not “if”, but “when”, it’s within our power to stop the next one from bringing the world to a grinding halt. We can’t say we haven’t been warned.
To the common observer, our current options seem to be either a return to local economies or a continued journey down the path of globalised trade. What both of these options have in common is that they preserve the status quo, which is what got us here in the first place.
A third option, however, involves a shift in economic and political attitudes away from immediate profit and towards sustainable development which would go on to influence coming generations for the better. This could mean, among other things, better containment of crises such as the one we’re facing now.