“A crisis like no other,” alarmist IMF forecasts

From left to right and from top to bottom: the President of the European Commission, Ursula von der Leyen, the President of the European Parliament, David Sassoli, the European Commissioner for the Economy, Paolo Gentiloni, the President of the European Central Bank, Christine Lagarde, and the Italian Prime Minister, Giuseppe Conte, discuss the economic situation in Europe, by videoconference, on June 13.

The return of the crowd in bars and restaurants, the borders that are gradually reopening, the approaching tourist season … these few outward signs of a false return to normal should not be trusted, according to the International Monetary Fund ( IMF), which publishes its alarmist forecasts, Wednesday, June 24. The decline in gross domestic product (GDP) for the world would reach 4.9% in 2020, according to its report. Never seen. “This is a crisis like no other”, notes the IMF.

This forecast is much worse than that made in April by the Washington institution, which then predicted a plunge of 3% of GDP, which was already an unprecedented fall. As a reminder, the 2009 global recession, which was then the worst in seventy years, had been – 0.1%.

Article reserved for our subscribers Read also Coronavirus: IMF predicts historic global recession, with growth decline estimated at 3% in 2020

“The Covid-19 pandemic had a more negative impact on economic activity than expected in the first half, and the return to growth will be more gradual than expected”, sums up the institution. Europe is by far the most affected region, since this is where the containment was most severe. In the eurozone, the fall in GDP should be 10.2% in 2020. Italy and Spain (-12.8%), but also France (-12.5%) are the most affected countries , with the United Kingdom (- 10.2%). In Germany, GDP is expected to fall by 7.8%. All these figures are, again, unprecedented.

China to escape recession

On the American side, the United States, where the containment was a little less severe and uniform, should experience a drop in GDP of 8%. In Latin America, where the virus continues to spread and where the pandemic is not under control, forecasts are catastrophic for Mexico (-10.5%) and Brazil (-9.1%). One of the only countries that should avoid recession is the country from which the pandemic started. The IMF indeed expects a minimum growth of 1% for China.

Why this worsening of the International Monetary Fund forecasts, only two months after an already alarmist report? The argument has three stages.

First, the impact of the near-complete closure of some economies has been worse than expected. Then, the return to normal will be longer than expected. It’s hard to imagine full movie theaters, packed restaurants, crowded planes. “Social distancing will persist in the second half”, notes the IMF. In addition, in countries where the pandemic is not under control, further containment measures may be unavoidable. In short, demand is not about to return to its pre-pandemic level.

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