Global recession to be worst since Great Depression: IMF

Wed, Apr 15, 2020

Lynette Tan


THE global economy is expected to contract sharply by 3 per cent in 2020 due to the Covid-19 pandemic, in what is likely to be the worst recession since the Great Depression, said the International Monetary Fund (IMF) on Tuesday.

If the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 per cent in 2021 as economic activity normalises, helped by policy support, said the IMF in its World Economic Outlook report.

But the level of gross domestic product will remain below the level predicted for 2021 before the virus hit, with "considerable uncertainty about the strength of the rebound".

The IMF also warned that there is "extreme uncertainty" around the global growth forecast, as it depends on how the pandemic evolves.

"Much worse growth outcomes are possible and maybe even likely," said IMF economic counsellor Gita Gopinath in a statement.

"This would follow if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment."

The latest global forecast is a stark contrast to the IMF's earlier one in January, where it had projected global economic growth of 3.3 per cent. The Fund noted that it is "an extraordinary revision over such a short period of time".

With the coronavirus pandemic wrecking damage across the world, some of the largest economies are set to take a hit. The US' economic growth is expected to shrink by 5.9 per cent this year, while Europe, where the outbreak has been "as severe as in China's Hubei province" in some parts, will see output contract by 7.5 per cent.

Developing economies fare only slightly better. The Asean-5, comprising Indonesia, Malaysia, Philippines, Thailand and Vietnam, is projected to shrink by 0.6 per cent. China, where the virus first broke out, is expected to grow by 1.2 per cent.

Deputy Prime Minister Heng Swee Keat said on Tuesday that Singapore must be prepared for "even rougher seas", even as the government takes the necessary measures to slow the contagion and protect lives.

"As the IMF emphasises, there is considerable uncertainty - so we hope for the best, and begin to prepare to emerge from this crisis. But at the same time, we must be prepared for even rougher seas," Mr Heng wrote in a Facebook post.

Referencing the IMF report, Mr Heng also said that Singapore must take immediate measures to "slow the contagion and protect lives, and give full support to our healthcare system".

These measures will take a toll in the short term on the economy, but are important for the long-term health of people, he added. At the same time, the government should do what it can to cushion the impact on people and businesses.

And that is what the government's efforts - through fiscal resources and safe distancing measures - seek to do, Mr Heng said.