How Deep an Economic Decline Can the World Expect in 2020?

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For the first time during the post World War II era, the global economy is expected to shrink due to measures in force worldwide to suppress the coronavirus, according to the IMF World Economic Outlook (WEO) released on April 14, 2020. In this edition of the WEO, the IMF shortened the forecast horizon to 2021 instead of the expected 2025 horizon and limited the number of indicators available in its statistical tables because of the high level of uncertainty in current global economic conditions.

Following we share our 5 key takeaways from WEO April 2020:

  1. In the baseline scenario—which assumes that the pandemic fades in the second half of 2020, allowing containment efforts to be gradually unwound—global GDP will decrease by 3% in 2020 compared to the IMF's January global growth projection of 3.3%. Compare this to the 0.1% contraction in global output recorded in 2009—a figure that technically is within the range of being written off as a statistical discrepancy—and you can understand how deep cutting is what some are now calling The Great Lockdown.
  2. Given the huge drop in production, unemployment is expected to skyrocket despite the fact that many countries have developed job-saving programs. As a result of a sharp jump in unemployment, per capita income in 9 out of every 10 of the 189 IMF member countries will decrease. In the US and Eurozone, unemployment will rise from 3.7%  and 7.6% in 2019 to 10.4% this year.
  3. Even in the fast recovery scenario under which world GDP for 2021 will increase by 5.8%, the cumulative global GDP loss over 2020 and 2021 could amount to $9 trillion, a figure that exceeds the economies of Japan and Germany combined.
  4. The crisis will hit the whole world but not all countries will experience GDP declines. Among the top 20 largest economies, four will continue to grow. In 2020, Egypt, Indonesia and—of global economic importance—India and China are expected to grow in the range of 0.5% to 2%.  
  5. The Great Lockdown will be the worst economic downturn since the Great Depression. Based on Knoema's past look at the accuracy of economic forecasts, the depth of the economic downturn in 2020 will not necessarily align with IMF predictions. For example, in April 2009 the IMF expected world GDP would decline by 1.3% in 2009. In the end, however, the global economy avoided contraction because of strong growth in China and India.

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