IMF expects global recession due to coronavirus

The world is facing an epochal recession because of the corona pandemic. The IMF's outlook for Germany and the Eurozone for this year is also bleak. In 2021 there is at least hope for a recovery.

Washington (dpa) - Because of the corona virus pandemic, the global economy will shrink dramatically this year: The International Monetary Fund (IMF) is facing the worst global recession in almost a hundred years.

Global economic output could decline by 3 percent in 2020, and that of the euro zone by as much as 7.5 percent, as the IMF explained in its latest forecast on global economic development.

A significant increase in unemployment must be expected. In January, the IMF had forecast global growth of 3.3 percent for 2020, and the 19 countries in the eurozone should grow by 1.3 percent.

"It's a truly global crisis because no country is spared," IMF chief economist Gita Gopinath told journalists.

The IMF calls the Corona crisis, based on the Great Depression of the 1920s and 1930s, the so-called Great Depression, "the Great Lockdown". Gopinath said the forecast economic downturn would be "the worst recession since the Great Depression and far worse than the global financial crisis" from 2008 to 2009.

The IMF is expecting shrinking per capita incomes for 170 countries around the world this year. Gopinath said global economic output would therefore decrease by around $ 9 trillion in 2020 and 2021 in 2020 and 2021.

The IMF expects a clear recovery in the coming year. The global economy should then grow by 5.8 percent compared to the previous year, that of the euro zone by 4.7 percent. However, the prerequisite for this is that the epidemic can largely be brought under control in the second half of 2020 and that economic life will normalize again, as the IMF explained.

However, the organization warned that the forecasts were "extremely uncertain". The economic consequences depended on a large number of factors, including the duration and intensity of the pandemic, it said. If the pandemic does not go down in the second half of the year, the global economy could even collapse by 6 percent this year and shrink in 2021, Gopinath said.

According to the IFW, the economy in Germany is expected to shrink by 7 percent in 2020 compared to the previous year, in Spain by 8 percent and in Italy even by 9.1 percent. For the USA, the largest economy in the world, the IMF forecasts a decline of 5.9 percent. Around 17 million people have applied for unemployment benefits there since mid-March, which suggests a dramatic economic downturn. According to the IMF, economic output in Japan is expected to decline by 5.2 percent. In China, in turn - where the Corona crisis now seems to be under control - the economy is expected to grow by at least 1.2 percent.

The IMF urged all governments to provide targeted support to the economy to overcome the consequences of the crisis. This included credit programs for affected companies as well as additional government funding to help affected industries, the IMF said. With targeted help, the way for a recovery in the coming year will be laid, it said.

However, many poorer countries do not have enough scope for additional expenditure. In order to get fresh money on the international credit markets, developing and emerging countries have to accept higher financing costs. Dozens of countries have therefore already applied for emergency loans to the IMF to strengthen their health systems and face the economic consequences of the pandemic. The IMF and World Bank are now also calling for poorer countries to be released from debt servicing until further notice.

For sub-Saharan Africa, the IMF expects economic output to shrink by 1.6 percent in 2020. The biggest economies are said to be particularly hard hit there, Nigeria (minus 3.4 percent) and South Africa (minus 5.8 percent). Nigeria has already applied for an emergency loan from the IMF. For South America and the Caribbean, the IMF expects a decline of 5.2 percent this year, and 2.8 percent for the Middle East and Central Asia.

The most recent economic forecast was presented at the IMF and World Bank spring meeting. Because of the corona virus, the conference - to which ministers, bankers and experts from all over the world travel to Washington - is held only virtually.

Link to the IMF forecast for January, English

IMF homepage, English

Blog of the IMF chief economist on the new forecast, English

Link to the new IMF forecast, English