Global growth is expected to fall to minus 3% this year with a potential loss to GDP of $9tn, according to the International Monetary Fund (IMF).
The growth figure is a significant downgrade of 6.3 percentage points on predictions made at the beginning of the year, before the coronavirus hit.
The IMF estimated global growth would rebound to 5.8% in 2021, assuming the pandemic fades in the second half of 2020 and countries take policy actions to prevent bankruptcies, job losses and other financial strain.
It added the recovery would be only partial in 2021 and growth would still be lower than previously predicted.
The IMF said the health crisis was characterised by “extreme uncertainty”. If the pandemic does not recede this year, there would be longer containment periods, worsening financial conditions and further breakdowns in global supply chains. In this case, global GDP could fall by an additional 3% in 2020, and 8% if the crisis continued into next year, the IMF said.
Speaking at a briefing, IMF economic counsellor and director, research department Gita Gopinath said now is not the time to reverse globalisation.
“These are difficult times in terms of globalisation for dealing with this pandemic. There has been a restriction on travel of people around the globe,” she said.
“There has been a breakdown of global supply chains as a result of the crisis. But it is very important that this does not become a feature where we reverse all the gains that we have got from globalisation.”
“Now, the world needs a healthy recovery, it needs a strong recovery, and that will not come about if the world deglobalises because that would severely reduce productivity in the world and that’s the last thing that we want at this time.”
Gopinath praised the UK’s response in taking an aggressive approach to support the economy.
“They’ve come in with large, substantial, very carefully targeted measures. They have done all the right things at this point. Considerable support to firms and to households and to the financial system,” she said.
According to the Office for Budget Responsibility (OBR), GDP in the UK could fall 35% in the second quarter of this year, but bounce back quickly. It predicted unemployment would reach 10% over the period and public sector borrowing would increase by £218bn in 2020-2021 compared to its forecast in March.
The forecast assumes a three-month lockdown followed by another three months where restrictions are partially lifted. However, the OBR did not attempt to predict how long the lockdown would actually last.