The IMF predicts a global recession in 2020 with ‘serious risk’ of worsening

The G7 industrial powers reiterated their commitment to do ‘whatever it takes’ to help, declaring themselves supporters of the temporary suspension of debt service for the poorest


The Covid-19 pandemic will cause a global recession in 2020, with an economic contraction estimated at 3%, and a ‘serious risk’ of worsening, the International Monetary Fund (IMF) said on Tuesday, noting that the Recovery will require more coordinated stimulation. The G7 industrial powers reiterated their commitment to do ‘whatever it takes’ to help, declaring themselves supporters of the temporary suspension of debt service for the poorest.
The IMF predicts a global recession in 2020 with ‘serious risk’ of worsening
Washington News Update: - The Covid-19 pandemic will cause a global recession in 2020, with an economic contraction estimated at 3%, and a ‘serious risk’ of worsening, the International Monetary Fund (IMF) said on Tuesday, noting that the Recovery will require more coordinated stimulation.
The industrial powers of the Group of Seven (G7) reiterated their commitment to do ‘whatever it takes’ to help, declaring themselves supporters of the temporary suspension of debt service for the world's poorest nations, if the G20 governments also they agree.
In publishing its latest report on ‘Prospects for the World Economy’, the IMF said that the isolation of the population to avoid infections and the consequent paralysis of economic activity, will reduce the growth of the planet ‘dramatically’, with greater impact on countries Developing.
The cumulative loss of global Gross Domestic Product (GDP) between 2020 and 2021 from the pandemic crisis could be around $9 trillion, larger than the economies of Japan and Germany combined,’ the chief economist told reporters from the IMF, Gita Gopinath.
But the Fund said that if the new coronavirus can be contained and activity can be gradually resumed in the second half of 2020, the global economy could grow 5.8% in 2021.
For the United States, the world's largest economy, the Fund estimated a contraction of GDP of 5.9% in 2020, and a recovery of 4.7% in 2021.
But he highlighted the ‘considerable uncertainty’ weighing on the strength of the rebound. ‘Much worse growth results are possible and perhaps even probable,’ the IMF said.
This could happen if the pandemic spreads and isolation measures are lengthened, if the blow in emerging economies is even greater than projected, if financial conditions are tightened, or if the closure of companies and prolonged unemployment leave widespread consequences.
The new coronavirus leaves around two million infected and more than 120,000 dead worldwide. To curb its spread, in recent weeks, more than half of the world's population has been called to stay at home, non-essential businesses were closed, and air traffic was drastically reduced, accentuating the collapse of oil prices.

Generalized losses

‘Most likely’ the world will experience the worst recession since the Great Depression of 1929, when the world economy contracted 10%, the IMF said. 
This forecast far exceeds the global recession due to the 2008 financial crisis, when the contraction in 2009 was only 0.1% and the emerging markets grew at a solid rate.
According to the IMF, only two economies will be saved this year from falling into a recession, but in both cases the expansion will be minimal: China, the birthplace of Covid-19, will grow 1.2%, while India will 1.9%.
Most of the large economies will suffer declines in their activity: the United States (–5.9%), Japan (–5.2%), the United Kingdom (–6.5%), while the collapse will be worse in the eurozone , with sharp falls in Italy (-9.1%), Spain (-8.0%), France (-7.2%) and Germany (–7.0%).
The contraction of GDP will be sharp in Latin America and the Caribbean (-5.2%), with blows for Mexico (-6.6%) and Brazil (-5.3%) and a deepening of the recession in Argentina (- 5.7%).
Among emerging countries, the impact will also be felt by Russia (-5.5%) and South Africa (-5.8%).
The IMF also anticipates an 11% decrease in the volume of trade in goods and services in 2020.

Coordinated stimulus

The recovery of the world economy after the pandemic phase will require more injections of money, and the stimulus will be ‘even more effective’ if the measures are coordinated among the most developed countries, Gopinath said on videoconference.
‘Once we are in the recovery, and we have passed the phase of the pandemic in advanced economies, it would be essential to carry out a broad-based fiscal stimulus,’ he said, adding that spending ‘would be even more effective if coordinated in all the advanced economies of the world. ‘
The IMF report underscored the need for ‘strong multilateral cooperation,’ in particular, increased financial assistance to emerging countries.
He also called for ‘reducing tariff and non-tariff barriers that prevent cross-border trade and global supply chains.’
G7 members (USA, Canada, France, Germany, Italy, Japan, and the United Kingdom) said in a statement that they ‘are ready to provide a temporary suspension of debt service payments’ from poor countries ‘if they join all official bilateral creditors in the G20 and as agreed with the Paris Club.‘
In addition, they indicated that they support the work of the G20, integrated among others by China and Russia, with the Institute of International Finance (IIF, the global association of financial institutions), ‘to ask private creditors to provide comparable treatment, in a voluntary manner’.
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