December 5, 2022

Coronavirus to lead to worst recession since the Great Depression and Africa will be hit hard, IMF says

Gita Gopinath
Gita Gopinath

The novel coronavirus pandemic will lead to the worst economic downturn since the Great Depression, the International Monetary Fund said on Tuesday in its latest world economic outlook. Virtually every country and continent, including Africa, would be hit hard, IMF projected.

Gita Gopinath, chief economist and director of the Research Department at the International Monetary Fund. Photo: Olivier Douliery/AFP via Getty Images

According to the IMF, the current recession would be “far worse” than the 2008 financial crisis, with global GDP falling to -3% this year, a drastic downgrade from its forecast of +6.3% in January.

Global GDP will face a cumulative loss of about $9 trillion, a vast amount larger than the economies of Japan and Germany combined.

Growth in advanced economies is projected to be -6.1% while emerging markets are projected to have growth rates of -1.0%, and -2.2 percent if China is excluded.

IMF projected that income per capita would shrink for over 170 countries, including in the United States where growth is projected to be -5.9%.

The eurozone will see -7.5% and Italy, the country in Europe hit the hardest by the pandemic, is projected to experience -9.1% growth.

The IMF projected that growth will partially rebound to +5.8% in 2021 if the pandemic fades in the second half of 2020 and if policy actions taken around the world are “effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains.”

Even proper action is taken, IMF projected that economic activity will still remain below what was forecasted for 2021 before the outbreak.

The IMF urged policymakers around the world to keep using lockdown and shutdown policies to stop the virus from spreading.

It explained they’re the best way to eventually be able to resume normal economic activities. “In this sense, there is no trade-off between saving lives and saving livelihoods,” the report stated.

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