The International Monetary Fund on Tuesday significantly reduced its expectations for global economic growth, anticipating a global recession amid the uncertainty caused by the spread of the novel coronavirus COVID-19.
The IMF, in its April World Economic Outlook report, said that COVID-19 had exacted high costs worldwide and that isolation measures are having a severe impact on economic activity.
The global economy is expected to contract by three percent in 2020, worse than during the 2008-2009 financial crisis.
“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,” Gita Gopinath, the IMF’s chief economist Gita Gopinath said in the World Economic Outlook report.
”Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent,” she added.
The IMF, which called the coronavirus crisis “The Great Lockdown” said that it had received an unprecedented number of requests for emergency financing, as more than 90 of the 189 member states applied for emergency financing.
Due to the crisis, the IMF expects the Russian economy to decline by 5.5 percent this year, and to rise again in 2021 to register a growth of 3.5 percent.
At first glance, the decline may seem large, but when compared with emerging European economies, it is not. According to the report, the German economy will decline in 2020 by seven percent, while the Italian economy will shrink by 9.1 percent.
The IMF expects the eurozone economy to shrink by 7.5 percent in 2020, and to rise by 4.7 percent in 2021.
The report expects Egypt will be the only Arab country to register economic growth, which is expected to be two percent in 2020 and to jump to 2.8 percent in 2021.
Lebanon, meanwhile, is expected to have one of the worst-performing economies in 2020, declining by 12 percent.
The Saudi Arabian economy is expected to decline by 2.3 percent in 2020, and to grow next year by 2.9 percent.
The IMF expected a similar situation for the UAE, saying that its economy will contract in 2020 by 3.5 percent, and will rise 3.3 percent in 2021.
“Risks of a worse outcome predominate. Effective policies are essential to forestall worse outcomes,” the report read, urging governments to do their best to reduce the spread of the infection, to protect lives and to invest in “long-term human and economic health,” especially by increasing spending on health care.
It also stressed the necessity of working to mitigate the impact of the economic downturn on individuals, companies and the financial system, to ensure that economic recovery can begin quickly once the pandemic recedes.
Edited translation from Al-Masry Al-Youm
Image: International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S. (REUTERS/Yuri Gripas)