What the IMF is now calling the “Great Lockdown of 2020” is expected to depress global GDP growth to -3.1 in the second quarter of 2020. “This makes the Great Lockdown the greatest recession since the Great Depression, said Gita Gopinath, the IMF’s Chief Economist. Ms. Gopinath made her comments in a report appearing in The Guardian.
By comparison, the Global Financial Crisis of 2008 depressed global GDP to just -0.1 percent.
Ms. Gopinath further said: “Assuming the pandemic fades in the second half of 2020, and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent. Now this recovery in 2021 is only partial, and the level of economic activity is projected to remain below the level we had projected for 2021 before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion, greater than the economies of Japan and Germany combined. Now this is a truly global crisis, as no country is spared.”
Horrible projections for the next several financial quarters is bad, but it’s not unexpected. The good news is that the entire world — a large share of whose population are equipped with powerful computers — is now engaged in finding strategies that will to allow economies to re-open. Battling COVID and reopening things will be a rolling process, a learning process, and no obvious “all clear” signal will sound.
If the claim that humanity’s battle against COVID-19 truly constitutes a “war,” then one must note that war is often the mother of invention. Penicillin, morphine, Teflon, modern management processes, and the Internet itself were all born of war. Let us hope that humanity — facing a common enemy — will cooperatively harness its brainpower to outwit this deadly enemy.
In the meantime, however, people are hurting. And while the U.S. government is not making the same mistake that the Hoover administration made in the 1930s, the instantaneous economic agony of the moment is alarming.
You can read a transcript of Ms. Gopinath’s remarks here: https://www.imf.org/en/News/Articles/2020/04/14/tr041420-transcript-of-april-2020-world-economic-outlook-press-briefing