The global coronavirus pandemic has triggered an “economic crisis like no other,” the International Monetary Fund warned on Wednesday, predicting that global GDP would plunge by 4.9% and Argentina’s own economy by 9.9%.
The IMF has said the virus crisis will wipe out US $ 12 trillion over two years, with Latin America’s economies among the hardest hit, the Brazilian economy is now expected to shrink by 9.1% and Mexico’s by 10.5%. For 2021, the Fund forecasts global growth of 5.4%, compared to 5.8%.
Having already warned of the biggest crisis since the Great Depression, the IMF said its heightened pessimism reflected the scars of a larger-than-expected supply shock in the previous foreclosure, in addition to the continued slump in demand. social distancing and other safety measures. For countries struggling to control the spread of the virus, a longer lockdown will also negatively impact growth, the IMF said.
Latin America has been one of the world’s worst hot spots for weeks, and the death toll in Latin America and the Caribbean topped 100,000 on Wednesday. Brazil has been the hardest-hit country, with its new cases even overtaking the United States – more than 42,700 on Wednesday.
“The curve in Brazil is still rising sharply. We are still in the first wave,” said Domingos Alves, professor of medicine at the University of São Paulo and member of a scientific committee monitoring the crisis.
World Health Organization chief Tedros Adhanom Ghebreyesus has said the global number of cases will reach 10 million over the next week, after four million cases were recorded last month alone. The global figure currently stands at over 9.3 million.
“We have an urgent responsibility to do all we can with the tools we have now to suppress transmission and save lives,” he said.
WHO Emergency Director Michael Ryan has warned that the pandemic has not yet reached its peak in the Americas.
He said it was “particularly intense in Central and South America” where many countries have seen “between 25 and 50% increase in cases over the past week”, and added that “the specter of new blockages cannot be ruled out ”.
Globally, the number of Covid-19 deaths has exceeded 480,000 after doubling in less than two months, according to an AFP count.
Business closures around the world have destroyed hundreds of millions of jobs and Europe’s major economies are facing double-digit collapses in the worst crisis since the Great Depression almost a century ago.
The outlook for recovery from the pandemic – like the forecast itself – is steeped in “widespread uncertainty” given the unpredictable trajectory of the virus, the IMF said in its updated World Economic Outlook report released on Wednesday. .
“The Covid-19 pandemic had a more negative impact than expected on activity in the first half of 2020, and the recovery should be more gradual than expected,” the fund warned.
As businesses reopen in many countries and China has seen a larger-than-expected rebound in activity, a second wave of viral infections threatens the outlook, according to the report.
According to current forecasts, IMF chief economist Gita Gopinath said the crisis would destroy $ 12 trillion over two years, and warned: “We are not out of the woods.” She warned governments against withdrawing the stimulus too quickly.
“It’s a crisis that requires all hands on deck,” she told reporters. While governments and central banks have made extraordinary efforts so far to provide support to workers and businesses, “more will be needed.”
“It is important not to back down very quickly, but to do it only gradually, because this crisis is not over,” Gopinath said.
The slowdown is particularly damaging for low-income countries and households, and threatens to jeopardize progress in reducing extreme poverty, the Washington-based crisis lender said in its report.
The fund drastically revised down most of the April forecast made at the start of the pandemic, and IMF economists fear the coronavirus will leave lasting scars on jobs, businesses and trade.
Above the forecast are the bills of massive government stimulus packages, fueled by extremely low interest rates and likely preventing the recession from turning into another depression, even though they have created huge debt levels. and always croissants.
Drastic downward revisions
The damage is nonetheless impressive and more extensive than any downturn in decades.
China will achieve 1% growth this year, the only positive figure on the IMF’s long list of key economies.
The United States will fall by 8% and Germany a little less, while France, Italy, Spain and Britain will experience double-digit contractions. Japan is doing a little better with a drop of just 5.8%, according to forecasts.
Mexico will also see a double-digit decline, while Brazil narrowly misses that mark, as does Argentina, which is in the midst of a massive debt tightening in addition to its health and economic crises after the country again defaulted on its foreign bonds.
The IMF highlighted data from the International Labor Organization estimating that more than 300 million jobs were lost in the second quarter of the year.
“A more prolonged decline in activity could lead to further scars, especially from larger business closures, as surviving businesses are reluctant to hire job seekers after prolonged unemployment,” the fund warned.
With transportation and manufacturing shut down for weeks on end, the IMF predicts that the volume of world trade will collapse by just under 12% – and advanced economies will experience an even more dramatic decline.
The IMF has also warned of the dangers posed by the erosion of relations between and within countries.
“Beyond the risks of degradation linked to the pandemic, the escalation of tensions between the United States and China on several fronts, the unraveling of relations between the coalition of oil producers of the Organization of the Exporting Countries of oil (OPEC +) and widespread social unrest pose additional challenges to the global economy, ”the report says.
Business disruptions could hurt productivity as companies change their supply chains in an attempt to protect against future outages, and businesses also face higher costs when adopting improved cleaning procedures and procedures. social distancing requirements.
Amid the uncertainty, the recession may be less severe than expected, according to the report.
“The downside risks remain significant, however,” he warned.
– TIMES / AFP / BLOOMBERG