The worldwide economic shutdowns forced by the coronavirus pandemic are expected to cause the worst year the global economy has seen since the Great Depression, according to top economists—raising concerns for the well-being of people in developing nations.
Ahead of meetings between world leaders this week, the International Monetary Fund (IMF) said the global economy will likely contract by about 3% in 2020 as governments around the world urge people to stay home and shut down businesses to slow the spread of the coronavirus, officially known as COVID-19.
The contraction of the economy is expected to be more severe than the recession of 2008 and 2009, when the global economy shrunk by about 0.1%, and represents a major reversal of the IMF's earlier predictions for this year that the global economy would grow by 3.3% in 2020.
"As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown," said Gita Gopinath, chief economist of the IMF. "The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes."
The IMF said the economic crisis could stretch into 2021 even if the spread of the virus significantly slows in the coming months, and if there is a resurgence of COVID-19 in the fall or early next year, the economy is not likely to rebound in 2021.
"As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes."
—Gita Gopinath, IMF
The global economy is expected to lose about $9 trillion in 2020 and 2021, according to the IMF's World Economic Outlook.
The warning intensified recent calls from anti-poverty campaigners for debt relief for the world's most vulnerable countries.
"Urgent action is required by the IMF and G20 this week," said Eric LeCompte, executive director of Jubilee USA, a coalition of faith and advocacy groups which secures debt relief for poor countries. "During the meetings this week world leaders must move forward aid, financing, and debt relief for developed and developing countries so people can survive the devastating health and economic impacts of the coronavirus crisis."
As Oxfam International said last week, even before the IMF released its prediction, about half the world population could fall into poverty if the Fund and the World Bank do not cancel $1 trillion in developing countries' debts and issue a $1 trillion stimulus package to shore up the healthcare systems and economies of poor nations.
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As Common Dreams reported Monday, Rep. Ilhan Omar (D-Minn.) joined the call to demand debt cancellation for developing countries, warning, "We could be on the precipice of a global financial crisis unlike any seen since the 1930s."
Jubilee USA was encouraged Monday after the IMF Executive Board approved $500 million debt relief for 25 developing countries, including Chad, Afghanistan, Rwanda, and Nepal.
The IMF's warning on Tuesday, however, prompted the coalition to call for more immediate action to shield vulnerable communities around the world from the worst effects of the anticipated global economic crisis.
"This is the most frightening news the Fund has ever released on the status of our global economy," said LeCompte. "When you analyze what the IMF is actually saying, the message is things could even get worse and they really don't know how bad it can actually get."
On social media, Oxfam reiterated its call for debt cancellation Tuesday.
They must use it to protect their people from the #coronavirus pandemic.
— Oxfam International (@Oxfam) April 14, 2020
"Stop collecting debt from the poorest countries," the organization said, addressing the IMF and the World Bank. "They must use it to protect their people from the coronavirus pandemic."