World faces worst recession since 1930s: IMF

The global economy is facing its worst recession since the 1930s, the International Monetary Fund has warned.

SIlvia Amaro reported the news for CNBC:

The global economy will this year likely suffer the worst financial crisis since the Great Depression, the International Monetary Fund said Tuesday, as governments worldwide grapple with the Covid-19 pandemic.

The Washington-based organization now expects the global economy to contract by 3% in 2020. By contrast, in January it had forecast a global GDP (gross domestic product) expansion of 3.3% for this year.

“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” Gita Gopinath, the IMF’s chief economist, said in the latest World Economic Outlook report.

CNN’s Charles Riley wrote:

“The Great Lockdown, as one might call it, is projected to shrink global growth dramatically. A partial recovery is projected for 2021 … but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound,” the IMF said. “Much worse growth outcomes are possible and maybe even likely,” it added.

In the United States, where lawmakers have approved over $2 trillion in stimulus and where the Federal Reserve has unleashed trillions more to keep the financial system from seizing up, the IMF expects the economy to shrink by 5.9% this year. That would be the worst slump since 1946, but a smaller decline in output than some European countries are likely to experience.

Growth in China, the world’s second-largest economy and the first to be slammed by the coronavirus, will meanwhile plummet to 1.2%. It hasn’t seen growth that weak since 1976.

Alan Rappeport and Jeanna Smialek from the New York TImes reported:

The impact is already evident in trade data, where slowing economic activity has caused global commerce to plummet. Tracking by S&P Global Panjiva published Tuesday showed global shipments of goods into the United States fell by 10.1 percent in March, the fewest number of monthly shipments since 2016. Consumer goods have been hit particularly hard, with shipments of furniture, apparel, steel and electronics falling by more than 15 percent last month compared with one year ago.

Ms. Gopinath said that the loss of global output would be “far worse” than the 2008 financial crisis and that policymakers were facing an unusual predicament in that traditional stimulus measures are little match for a pandemic that is being fought with shutdowns and quarantines.

“It is very likely that this year the global economy will experience its worst recession since the Great Depression,” she said.

According to the I.M.F., the global economic contraction from 1929 to 1932 was approximately 10 percent. Advanced economies shrank by 16 percent during that period.