The coronavirus will cause global GDP to fall by three points, with losses of $9 trillion in 2020. So says the International Monetary Fund.
There was great anticipation for the World Economic Outlook, the bulletin with which the International Monetary Fund (IMF) periodically takes stock of the state of the global economy. The April 2020 update provides an estimate of the consequences of the pandemic caused by the coronavirus, and it is a dramatic one: a contraction of 3 per cent in the global economy over the course of the year. For a point of comparison, the global financial crisis of 2008–2009 had led to just a minus 0.1 per cent.
But what exactly does a 3 per cent decline in the global economy correspond to? IMF chief economist Gita Gopinath provides an answer: between 2020 and 2021, she explains, $9 trillion in GDP could go up in smoke. A figure that exceeds the combined size of the German and Japanese economies. It had not been since the 1929 crisis that a recession of this magnitude had been witnessed. The collapse is expected to be followed by a rebound of 5.8 per cent in 2021. A tangible recovery, but still a partial one, Gopinath continues, because it remains below the growth projections drawn up by the IMF before the outbreak of the pandemic.
All of this according to the baseline scenario, which assumes that in the second half of this year the pandemic will ease and that containment measures can therefore be progressively lifted. "The risks of even more severe consequences, however, are substantial," the report continues, calling on governments to put in place rapid, bold and effective measures. On the one hand, to slow the contagion and save human lives. On the other, to avert the collapse of those specific sectors that have been hit particularly hard by the emergency, by launching a mix of fiscal, monetary and financial measures. All of this without forgetting multilateral cooperation, which is indispensable for giving breathing room to the worst-affected countries and those with particularly weak health systems.
The blow is particularly severe for Italy, which according to the International Monetary Fund should expect a true collapse in GDP: minus 9.1 per cent in 2020. Here too a recovery is forecast for the following year, at 4.8 per cent, but it is cold comfort. While it is true that the group of advanced economies will be hit particularly hard by the recession (minus 6.1 per cent of GDP in 2020) and that the figures are even worse in the euro area (minus 7.5 per cent), it is also true that in Europe only Greece faces a bleaker horizon, with a projected minus 10 per cent in 2020.
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Spain, too, is set to pay a dramatic price, with a GDP contraction of 8 per cent in 2020, only partially offset by the 4 per cent increase forecast for the following year. On 14 April itself, the same day the International Monetary Fund report was published, the country passed the symbolic threshold of one month of lockdown. And thousands of workers in the construction and manufacturing sectors returned to their jobs, following the first easing of restrictions granted by Pedro Sánchez's government.
For France, the IMF forecasts a minus 7.2 per cent in GDP in 2020, followed by a plus 4.5 per cent in 2021. But economy and finance minister Bruno Le Maire, interviewed by the channel Bfm Tv, is even more pessimistic. Up until the previous week the central bank had estimated a contraction in the economy of 6 per cent in 2020, but the estimate has been revised upward to 8 per cent. President Emmanuel Macron has extended the confinement measures until 11 May, ordering the reopening of nursery and primary schools on that date.
It is far too optimistic to believe that the United States faces the risk of recession: the truth is that it will certainly face a recession within the next 12 months. The statistical model developed by Bloomberg economists Eliza Winger, Yelena Shulyatyeva, Andrew Husby and Carl Riccadonna, which cross-references a series of data on economic and financial market dynamics, is unequivocal. Bloomberg
The coronavirus outcome is a staggering 100 per cent probability of recession, which already virtually brings to an end an expansionary phase that had lasted for years. Some data are not yet available and will need to be incorporated at a later stage, but for now what weighs particularly heavily is the record wave of weekly unemployment benefit claims; around 10 million were filed in the last fifteen days of March. According to some analysts, around 20 million Americans will have lost their jobs by July.
According to data released by Johns Hopkins University on 14 April, at least 584,073 people in the United States had contracted the coronavirus and 24,485 had died. Three in ten deaths occurred in the city of New York, which alone recorded 106,763 confirmed cases.
