The coronavirus crisis will exact the biggest toll on the global economy since the 1930s Great Depression and potentially hit Britain harder than the Spanish flu epidemic and first world war, according to warnings from the IMF and the UK’s fiscal watchdog. The fund’s sobering estimates expect the pandemic to leave lasting economic scars, with the economies of most countries emerging 5 per cent smaller than planned, even after a sharp recovery in 2021.
It said the output loss would “dwarf ‘ the global financial crisis 12 years ago. The global contraction this year will be so bad that only a handful of people in the world will have experienced a similar event in their adult lifetimes. The IMF had to look back 90 years to the 1930s Great Depression to find a deeper recession. The bleak forecast was reinforced by the UK’s Office for Budget Responsibility, which issued a “reference scenario” that showed national output plunging 35 per cent in the second quarter in the event of a three-month lockdown.
While avoiding some of the most pessimistic assumptions in the private sector, the IMF expects advanced economies to contract by 6.1per cent and emerging economies to shrink by 1 per cent this year. Positive growth is still expected in India and China.
Even after the sharp rebound which the IMFforecasts for next year, output is still expected to be 5 per cent lower in 2021 than expected in the IMF’s forecasts from October last year for advanced economies.