The International Monetary Fund called the current economic downturn due to the coronavirus pandemic as "The Great Lockdown" which is expected to be the worst economic downturn since the Great Depression in the 1930s. The outcome of the Great Lockdown is expected to be a 3.0% contraction in the world's economy in 2020, far worse than the 0.1% contraction as a result of the global financial crisis in 2008-2009.
Gita Gopinath, IMF's Economic Counsellor, said that the Great Lockdown would incur $9 trillion of cumulative loss to global GDP this and next year. The world's economy will only begin partial recovery in 2021, with growth rebounding to 5.8%. This assumes the pandemic wanes in this year's second half, and policy measures taken by governments across the globe are effective in preventing strains in the financial system, extended job losses, and widespread bankruptcies.
Even the IMF's baseline scenario expected economic contraction in most of the world's major economies. The US will likely see its economy shrinking by 5.9% in 2020, and rebounding to 4.7% growth in 2021. The Eurozone economy is expected to contract by 7.5% this year. Italy is forecast to be the worst-hit economy, shrinking by 9.1%, followed by Spain (-8.0%), France (7.2%), and Germany (-7.0%). The Eurozone economy is projected to match US growth of 4.7% in 2021.
On the other hand, China, which became the first epicentre of the outbreak, is seeing its business activities resuming. The IMF expects China to maintain a positive growth of 1.2% this year. However, it is much slower than IMF's previous prediction of a 6.0% growth. India's economy is also expected to maintain positive growth, expanding by 1.9%. However, ASEAN 5 and Latin America's economy is likely to contract by 0.6% and 5.2%, respectively this year before rebounding to 7.8% and 3.4% next year.
The Great Lockdown is caused by coronavirus containment measures which paralyze the world's economic activity as business shut and people are told to stay home. However, tight measures should continue to allow health systems to deal with the disease, according to Gopinath. This will then lead to a resumption of economic activity. Under some scenarios when the pandemic lasts for longer durations, the IMF forecasts global GDP would contract even deeper, ranging from 6% to 11% contraction.
