IMF calls for multilateral co-operation and debt relief as global economy set to contract

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The global economy is forecast to shrink 3% this year and will slide into the worst recession since the 1930s, according to the fund

The global economy, facing its greatest crisis since the 1930s, is projected to contract sharply this year, dragged down by the impact of the coronavirus, the most serious pandemic in a century, which has brought economic activity to a halt, the International Monetary Fund said.

The global economy is projected to shrink 3 per cent in 2020, a sharp revision from a previous 3.3 per cent expansion forecast and a grimmer outlook than the 2008 financial crisis.

“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” the fund’s chief economist Gita Gopinath wrote in the 37-page World Economic Outlook (WEO) report released on Tuesday.

“The Great Lockdown, as one might call it, is projected to shrink global growth dramatically. A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP (gross domestic product) will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound.”

The growth forecast for this year is marked down by more than 6 percentage points relative to the October 2019 WEO and January 2020 WEO update. The downward revision for this year is largely a result of advanced economies shrinking 6.1 per cent this year after expanding 1.7 per cent in 2019, according to IMF forecasts.

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