Worst Economic Crisis since the Great Depression
We could be heading into the Worst Economic Crisis since the Great Depression; According to the International Monetary Fund, world GDP will decrease by 3% in 2020. For industrialized countries, the drop is even more brutal, at 6.1%. The consequences on trade, employment and investment are severely felt worldwide.
International Monetary Fund says Worst Economic Crisis since the Great Depression
The warning signs had been evident for several weeks. Now, the cyclical forecasts of the International Monetary Fund (IMF) published on Tuesday confirm a sharp contraction in activity in 2020. Global gross domestic product (GDP), + 2.9% in 2019 compared to the previous year, will fall by 3% this year. “We are experiencing the worst economic crisis since the Great Depression of the 1930s,” says its chief economist, Gita Gopinath.
In detail, growth will be negative in industrialized countries with 6.1% in 2020. In the United States, the decrease will be 5.9% and in the euro area 7.5%. Italy, the first affected country in Europe, will pay the highest price: -9.1%.
According to the IMF, Switzerland’s GDP will drop from 0.9% in 2019 to -6% this year. In mid-March, the Secretary of State for Economic Affairs (Seco) expected a contraction of 1.5%. A figure that rose last week to 7%, even to 10% in a second more pessimistic scenario.
Paralysis
These forecasts, underlines the IMF, reflect the situation of the day, which is marked by a paralysis of most of the worldwide activity of Covid-19. They start from an optimistic scenario where the pandemic will be under control in the second half of the year, which will mitigate its negative impact in the first half. In this perspective, world growth will take off next year and will reach 5.8%.
In the United States, as in the euro zone, it will be 4.7%. Switzerland will also grow again to 3.8%. As for emerging countries, it will reach 8.5% in China, 7.4% in India and 2.9% in Brazil.
“There are many reasons to be optimistic,” says Gita Gopinath. By then, respect for social distance, the discovery of vaccines and the support of the state budget – $ 8 billion in total – and the monetary measures of the central bank will have helped the economies. The IMF chief economist recalls that in 1930 there were no coordinated reactions at the global level, and even less so from multilateral institutions to help states in difficulty.
The year had started well
2020 had started well, however. The IMF expected positive and sustained growth for the vast majority of its members. The situation has now been reversed for its 170 members. At this stage, retail, hotels, and tourism, as well as transportation, are experiencing the greatest disaster. On the manufacturing side, the automotive industry is paralyzed in particular due to the breakdown of global value chains.
The crisis is more visible in terms of world trade. The World Trade Organization (WTO) predicts a collapse between 13 and 32% in 2020. The fall refers first to supply, the result of the interruption of the supply chain, the closure of ports and airports as well, only measures Protectionist, some countries prohibit the export of certain products. The crisis is also in demand, both by households and by industrialists.
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