The Coronavirus Crash

By Yash Khushalani

The global economy has suffered fourteen global recessions since 1870, some of which have resulted in severe economic contractions. With more than a third of the world’s population being forced into lockdown, the COVID-19 pandemic is likely to plunge the global economy into its worst recession since the Second World War.

The International Monetary Fund (IMF) has forecast that the global economy may shrink by up to 5.2% at the fastest pace in decades. The IMF’s chief economist Gita Gopinath stated this crisis could knock an estimated US $9 trillion off global Gross Domestic Product (GDP) within the next two years.

Although countries have been swift and sizeable in their response to the virus, it is unlikely that any country will escape the downturn. Both developing and advanced economies are expected to fall into recession, with the prediction that growth in advanced economies will not get back to its pre-COVID peak until 2022. The US economy is on the brink of its biggest annual decline since 1946, where it is expected to shrink by 5.9% this year, while the Chinese economy is expected to grow by only 1.2%, its slowest growth since 1976. If the pandemic is not kept under control and the world experiences a second wave in 2021, it could cause an additional 8% decline in global GDP.

The Coronavirus pandemic and the restrictions are forcing businesses to shut their doors, which is causing an increase in unemployment rates and contributing to the overall recession. Of the 3.3 billion people in the global workforce, 81% of them have had their workplace fully or partly closed. It is turning into a catastrophic situation, as nearly 200 million people could end up without a job during the third quarter of 2020. Each sector of the economy has been hit differently due to the sudden downturn in work, with retail, manufacturing, and accommodation and food workers facing the greatest risk. With social lives being put on hold and travel being brought to a standstill, the accommodation and food industries are among those that are suffering the most.

It may not be all doom and gloom for the world as partial recovery is projected for 2021. There is the possibility that global growth will rebound by 5.8% in 2021 if the virus fades in the second half of 2020. However, the strength of the rebound is unpredictable, and the level of GDP growth is likely to remain below the pre-COVID trend.

Sources: BBC, worldbank, theconversation

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