Imf expects global recession due to corona virus
Due to the coronavirus pandemic, the global economy will shrink dramatically this year: the international monetary fund (IMF) expects the worst global recession in almost a century.
Global economic output could fall by 3 percent in 2020, and by as much as 7.5 percent in the euro zone, according to the IMF’s latest global economic forecast. In january, the IMF was still forecasting global growth of 3.3 percent for 2020, with the euro zone expected to grow by 1.3 percent.
"It is a truly global crisis because no country will be spared," IMF chief economist gita gopinath told journalists. A significant increase in unemployment had to be expected.
The IMF refers to the corona crisis as "the great lockdown," in reference to the world economic crisis of the 1920s and 1930s. Gopinath said the predicted economic slump would be "the worst recession since the great depression and much worse than the global financial crisis" of 2008 to 2009.
IMF expects per capita incomes to shrink in around 170 countries this year. Global economic output is therefore likely to fall by around 9 billion US dollars (8.2 billion euros) in 2020 and 2021 because of the pandemic, gopinath said.
IMF expects significant recovery next year. The global economy is expected to grow by 5.8 percent compared to the previous year, and the 19 eurozone countries by 4.7 percent. However, the precondition for this is that the epidemic can be largely brought under control in the second half of 2020 and economic life also returns to normal, as the IMF explained.
The organization warned, however, that the forecasts are subject to "extreme uncertainty". The economic consequences depend on many factors, including the duration and intensity of the pandemic, it said. If the pandemic does not recede in the second half of the year, the global economy could slump by as much as 6 percent this year and continue to contract in 2021, gopinath said.
According to the IMF, the german economy is expected to shrink by 7 percent in 2020 compared with the previous year, while the spanish economy will contract by 8 percent and the italian economy by as much as 9.1 percent. For the U.S., the world’s largest economy, the IMF foresees a 5.9 percent contraction.
Since mid-march, some 17 million people there have already applied for unemployment benefits, suggesting a dramatic economic slump. According to the IMF, economic output in japan is expected to decline by 5.2 percent. In china, on the other hand – where the corona crisis now appears to be under control – the economy is expected to grow by at least another 1.2 percent.
The IMF called on all governments to provide targeted support to the economy to overcome the consequences of the crisis. This would include credit programs for affected companies as well as additional government funding to help affected industries, the IMF said. Targeted aid will pave the way for recovery in the coming year, it added.
However, many poorer countries do not have sufficient room for additional spending. And developing and emerging countries are now facing higher financing costs to obtain fresh money on the international credit markets.
As a result, dozens of countries have already applied to the IMF for emergency loans to strengthen their health systems and cushion the economic impact of the pandemic. The IMF also announced debt relief for 25 of the poorest countries, including afghanistan, haiti, mali, mozambique, congo and yemen.
The leading industrialized countries of the G7 group also declared on tuesday that they would suspend debt service for the poorest countries for a limited period because of the corona crisis. However, the participation of all G20 countries is a prerequisite, according to a statement by the U.S. Department of the treasury following a telephone conversation between G7 ministers and central bank heads. China, which has recently extended loans to many developing countries, had to agree to this, among other things. The IMF’s pot of emergency aid should also be increased, it added.
The federal government in berlin also signaled approval for an increase in the IMF’s CCRT disaster fund. "We will again support the initiative financially," was the message from the finance ministry on tuesday. The federal government would also stand by the IMF in the event of further decreases.
In france, finance minister bruno le maire said there was already a consensus within the G20 to grant the poorest countries a payment deferral this year. "We have achieved this in the framework of the paris club and in the framework of the G20, because china has supported our approach," said le maire.
This affects 76 countries, mainly in africa. The agreement involves some 20 billion U.S. Dollars. The paris club has 22 members, including germany. They have similar credit rules and continue to negotiate greater debt relief for sovereigns.
For the countries of africa south of the sahara, the IMF expects economic output to shrink by 1.6 percent in 2020. The worst hit economies are expected to be nigeria (down 3.4 percent) and sud africa (down 5.8 percent). Both have also been hit hard by the fall in commodity prices. Nigeria has already applied to the IMF for an emergency loan. For south america and the caribbean, the IMF projects a 5.2 percent decline this year, and for the middle east and central asia, 2.8 percent.
The latest economic forecast was presented at the spring meeting of the IMF and the world bank. Due to the corona virus, the meeting, to which ministers, bankers and experts from all over the world usually travel to washington, is only taking place virtually.
RELATED POSTS
Bahr defends draft law on assisted suicide |
Nationwide warning strikes at locks |
Lowen are in a tight spot The project of the lowen exists only since the middle of 2018 and was founded after the bundesliga relegation of the gotha rockets playing in erfurt, to… |
Opposition wins parliamentary election in malta |