The global economy may not recover from the coronavirus outbreak next year, according to an expert from the International Monetary Fund (IMF).
It is highly unlikely that the global economic activity, which has been slowed down by the coronavirus pandemic, would fully recover even by the end of 2021, said Gita Gopinath, chief economist at the IMF.
IMF downgraded its economic predictions this week. The fund suggests that the global economy will plunge by 3% this year before recuperating by 5.8% next year. Gopinath describes this rebound as a “partial recovery.”
“We have a recovery projected for 2021 of 5.8% growth, but that is a partial recovery,” Gopinath told CNBC’s “Squawk Box Asia” on Friday.
“So even by the end of 2021, we’re expecting level of economic activity to be below what we had projected before the virus,” she noted.
The coronavirus outbreak has now recorded more than two million confirmed COVID-19 cases around the world. This led to government-instituted lockdowns and closures of schools and businesses, halting global economy.
Governments and central banks worldwide developed measures and programs to aid businesses and households affected by the coronavirus outbreak. Gopinath said the actions made in several countries are “aggressive” and “rapid.”
In the US, around 7.5 million small businesses are expected to permanently shut down if the coronavirus outbreak persists. According to the survey held by Main Street America, eight in 10 businesses have already shut down temporarily due to the the coronavirus crisis.
Meanwhile, the economic damages brought by the coronavirus pandemic can push half a billion people into poverty, according to the new report released by Oxfam.
“I think if you compare that to the global financial crisis ... the response has been just that much speedier and the scale of it has been that much bigger,” she said, noting that economies around the world have announced about $8 trillion worth of fiscael stimulus.
“The concern we have is more about developing and emerging economies that have less of a fiscal space, have to deal with external account problems, and I think they’re in a tougher spot,” she said.
Due to the coronavirus pandemic, Asia’s economy is not likely to experience growth this 2020, and this is happening for the first time in 60 years, based on a statement of IMF.
“This is a crisis like no other. It is worse than the Global Financial Crisis, and Asia is not immune,” said Chang Yong Rhee, director of the Asia and Pacific Department at the IMF, in a blog post published on Wednesday.
Moreover, the IMF described the global economy loss due to coronavirus pandemic as the worst financial crisis since the Great Depression.
Comparing the current global economy to the Great Depression, the IMF’s chief economist thinks that “we are (now) better off on the health front. On the economic front, I think it makes a big difference that there are lenders of last resort, that monetary policy is proactively able to come in and ensure enough liquidity in markets, that fiscal policy is able to play a major role in supporting firms and households.”
