Gita Gopinath
is the Chief Economist at the International Monetary Fund. The first woman to hold that position, Dr. Gopinath is also Economic Counsellor at the Fund and the Director of the IMF’s Research Department. This morning she participated in a virtual briefing on the IMF’s just released World Economic Outlook for 2020. Today’s featured quote is from Dr. Gopinath’s opening remarks this morning.
What follows below is our transcription of the first few minutes of her presentation. You will want to watch the video for yourself, as it includes some very useful graphs as well as the comments quoted here. Because this is such a long quotation, we shall dispense with the usual italics. The emphasis in all cases is ours.
***
DR. GOPINATH:
Good morning, everyone. I hope all of you are doing well and are healthy. I’d like to first start by thanking the numerous doctors, nurses, and first-responders all over the world who are working so hard to keep us safe during these difficult times.
Now the world has changed dramatically in the three months since our last update of the World Economic Outlook in January. A rare disaster, a coronavirus pandemic, has resulted in a tragically large number of human lives being lost. Now, as countries implement needed containment measures to control the pandemic, the world has been put in a great lockdown. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes. This is a crisis like no other, which means there is substantial uncertainty about the impact it will have on people’s lives and livelihoods. A lot will depend on the epidemiology of the virus, the effectiveness of containment measures, and the development of therapeutics and vaccines, variables which are very hard to predict.
In addition, many countries face multiple crises, a health crisis, a financial crisis, a collapse in commodity prices, especially for commodity exporters, and all of [these] interact in complex ways. Now policy makers are responding in an unprecedented manner by helping households, firms, and financial markets. However, there is still considerable uncertainty about what the economic landscape will look like when we emerge from this lockdown.
So now, under the assumption that the pandemic and required containment peaks in the second quarter in most countries in the world, and then recedes in the second half of this year,
we are projecting global growth to fall in 2020 to minus 3 percent.
Now this is a downgrade of 6.3 percentage points from January 2020, major revision over a very short period of time.
This makes the Great Lockdown the worst recession since the Great Depression and far worse than the Global Financial Crisis.
Assuming the pandemic fades in the second half 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strain,
we project global growth in 2021 to rebound to 5.8 percent.
Now this recovery in 2021 is only partial, as the level of economic activity is projected to remain below the level we had projected for 2021 before the virus hit.
The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion, greater than the economies of Japan and Germany combined.
Now this is a truly global crisis as no country has been spared. Countries reliant on tourism, travel and entertainment for their growth are experiencing major disruptions.
Emerging markets and developing economies face additional challenges. They face unprecedented reversals in capital flows, major currency pressures, while at the same time coping with weaker health systems and much lower fiscal space to support their economies.
So for the first time since the Great Depression both advanced economies and emerging and developing economies are in recession. For 2020 growth in advanced economies is projected as minus 6 percent, emerging market and developing economies, which typically have normal growth levels well above advanced economies, are also projected to have negative growth of minus 1 percent and minus 2.2 percent if you exclude China.
Now income per capita is projected to shrink for over 170 countries. Now we are projecting recovery for both advanced economies and emerging and developing economies in 2021, but that again is partial.
Now what I have described is a baseline scenario, but given the extreme uncertainty around the duration and intensity of the health crisis, we also explore alternative, more adverse scenarios. The pandemic may not recede in the second half of this year, leading to longer containment periods, worsening financial conditions, and further breakdowns in global supply chains. In such cases, global GDP would fall even further, by an additional 3 percent in 2020. And, if the health crisis rolls over into 2021, it can reduce levels of global GDP by an additional 8 percent compared to the baseline.
