In the Global Economic Prospects report published on 14th April, the International Monetary Fund (IMF) includes the gloomy economic forecasts this year, including the drop in GDP of 5.9% of the US and the 1.2% economic growth of China.
The global economy is expected to drop by 3% in 2020, shattering the growth rate achievements of 2.9% of 2019. “It is likely that the global economy will suffer the worst depression there have even been since the Great Depression in the 1930s”, IMF Chief economist Gita Gopinath comments.
“The impacts of this depression will be even more severe than the global economic crisis that happened one year ago.” “This is unprecedented”, Gita Gopinath says, addressing the huge scale of the shock, the constant instability, and the inability of traditional stimulus measures.
The reason here is because the crisis is “majorly the result of the necessary measures to prevent COVID-19”. In this difficult year, IMF considers Asia a rare area with a positive growth rate in 2020 of 1%.
“The Asian market will witness growth in the relatively challenging 2020,” IMF said. Simultaneously, the GDP of the US and Japan have dropped by respectively 5.9% and 5.2% amid the worst economic depression there has ever been since the Great Depression. IMF also expects the growth rate of China to drop to 1.2% this year.
Different from China, India receives a growth forecast of 1.9%, even though this number is a major decrease when compared to the 4.2% rate last year. In Southeast Asia, Vietnam, the Philippines, and Indonesia all plan to maintain a positive state with growth rates of respectively 2.7%, 0.6%, and 0.5%.
Meanwhile, Thailand expects its growth rate to drop by 6.7% and Malaysia expects its to drop to a negative 1.7%. The IMF forecasts a sharp decline for all major advanced economies, including a 6.5% drop for the UK and a 7.5% drop for the EUR. The growth rate of Italy, where the epidemic affects the most, is expected to fall by 9.1% The growth rates in South Korea and Singapore are expected to decrease by respectively 1.2% and 3.5%, according to the IMF.
The basic assumption is that the pandemic will be weakened in the second half of 2020. Under that scenario, the global economy is expected to grow by 5.8% by 2021 when normal economic activity returns, supported by government policies.
Asia is also expected to lead the world when it recovers in 2021, with an expected growth of China of 9.2% and an expected growth of India of 7.4%. The ASEAN-5, including Indonesia, Malaysia, Philippines, Thailand, and Vietnam, is expected to grow by an average of 7.8% next year. Specifically, Vietnam will grow by 7%, Indonesia will grow by 8.2%, Malaysia will grow by 9%, Thailand will grow by 6.1%, and the Philippines will grow by 7.6%.
However, unpredictable factors are still present. “Efforts to stop or slow the spread of the virus may need to take longer than the first half of 2020 to be fully implemented and effective if the pandemic persists longer than it is originally reported.
Once containment efforts are lifted and people begin to move more freely, the virus might spread rapidly from leftover epidemic clusters. " Chief economist Gopinath said: "A partial recovery is expected to occur in 2021, with the above-mentioned growth rate, but the GDP levels of different countries will remain lower than what they were before the COVID-19 epidemic.
Therefore, the strength of the recovery is not too clear”. "The chances of having a much worse growth rate is still likely to happen," noted Gopinath.