According to the IMF, the world economy is predicted to experience negative economic growth of -3% this year. This projection comes after the IMF released their latest world economic outlook report a survey which is usually published twice a year by the IMF on global economic developments and the likely impacts on economic growth around the world.
If this prediction by economists at the IMF is anywhere close to becoming true, the global economy is set to experience the worst economic crisis and ensuing recession since the great depression of the late 1920s and 1930s. Even the global financial crisis of 2008 and 2009 only resulted in a negative growth rate of -0.1%.
Whilst this projection does paint a very bleak picture for 2020, the report did suggest that the global economy would quickly rebound and grow by 5.8% in 2021. This does however rest on the assumption that the spread of Covid-19 will fade away in the second half of the year and that the unprecedented actions taken by governments all around the world will be effective in protecting people’s jobs, preventing businesses from going bankrupt, and keeping the financial and money markets ticking over.
No economy is safe from the destruction being caused by this pandemic. In recent years, the developing world has been relatively sheltered from large global economic shocks, but this is not the case this time around.
Developing economies are facing the reversal of capital inflows as foreign investors look to manage their risk, poor healthcare systems are under huge amounts of pressure, and governments have very limited fiscal capacity to boost their economies. In addition to this, millions of people already live on the poverty line, and with the slump in global demand for manufactured goods, many are now facing unemployment, perpetuating their poverty even further.
As coronavirus cases continue to increase globally, the whole world must come together in the face of such destructive uncertainty. The economic impact on us all will be huge, but it can be mitigated if policy makers from both governments and transnational institutions can work together to solve this crisis, and formulate a plan to ensure that all members of the global community are protected and supported in their recovery from this historic pandemic.
THINK LIKE AN ECONOMIST!
Q1. Explain some of the actions which have been taken by governments around the world to support their economies in the last 3 months.
Q2. What does the IMF global growth projection depend on?
Q3. Evaluate the view that all people around the world are suffering equally from the economic impact of the coronavirus.
