The Covid-19 pandemic shock will render a severe blow more detrimental than the financial crisis of 2009, with the global economic growth plummeting to minus 2.8 per cent in 2020 as all emerging markets except for China sink into recession, warned an international think tank.
The unprecedented meltdown will affect India, where a strict national shutdown will result in a contraction of 0.3 per cent in fiscal 2020-21, the Washington-based Institute of International Finance said in a grim forecast.
"We revise our forecast for global GDP growth down significantly to -2.8 per cent from 2.6 per cent in our October 2019 Capital Flows Report," said Robin Brooks, chief economist at the IF.
"Thus, the Covid-19 shock is markedly worse than the global financial crisis (GFC) in 2009, when global GDP declined by 2.1 per cent. Importantly, we expect a more pronounced economic contraction in emerging markets this year," said Brooks.
The synchronised nature of the COVID-19 shock is responsible for the depth of this recession episode, as is the public health nature of the crisis. "Our forecast assumes stabilisation and partial recovery in the second half of the year, a premise that is subject to downside risk," said Elina Ribakova, IIF's deputy chief economist.
The IFF expects China to grow by 2.1 per cent this year and developed market economies to contract sharply - the United States by 3.8 per cent, Japan by 4.2 per cent, and the Euro area by 5.7 per cent.
Growth across emerging markets was weak even before Covid-19 became an issue, and "we forecast growth in EM excluding China to come in at minus 2.6 per cent in 2020." IIF said the projected contraction is broad-based, with emerging Europe and Latin America experiencing the largest declines - 4.7 per cent and 5.0 per cent respectively.
" Brazil, having not fully recovered from the 2015-16 recession, is projected to see economic activity slow by 4.1 per cent, while Mexico will be heavily affected by output contraction in the United States and see its GDP decline by 5.8 per cent. In emerging Europe, we expect Turkey's economy to shrink by 2.7 per cent and Russia's by 5.1 per cent. Both will be significantly affected by the deep recession that is expected to unfold in the Euro area as result of Covid-19. Finally, the global recession will have dramatic consequences for South Africa, where we forecast activity to decline by 4.7 per cent," the IIF said.
issacjohn@khaleejtimes.com
Published: Sun 12 Apr 2020, 4:31 PM
Updated: Sun 12 Apr 2020, 6:38 PM
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