CORONAVIRUS will send the global economy into free fall, unleashing the worst recession since the 1930’s Great Depression, the International Monetary Fund has warned – and Europe is expected to bare the brunt of the economic crisis.
Global economic growth “will turn sharply negative in 2020”, with 170 of the IMF’s 189 members experiencing a drop in their GDP, according to Bulgarian IMF chief Kristalina Georgieva.
The IMF anticipates the worst economic fallout since the Great Depression.” She said hundreds of billions of dollars of foreign aid would need to be mobilized to assist emerging and developing countries.
Ms Georgieva warned situation could continue to worsen if the global pandemic fails to fade in the second half of the year. There is tremendous uncertainty about the outlook: it could get worse depending on many variable factors, including the duration of the pandemic.
In a separate forecast, the European Central Bank has predicted the Euro-zone will experience a deeper recession than the rest of the world.
The European Union’s 19-member single currency bloc might not show proper signs of recovery until next year, according to ECB vice-president Luis de Guindos.
Germany, the EU’s largest economy, is expected to shrink by nearly 10% in the first quarter, while France is also expecting a hit by about 6% in the current period.
We will have to wait until 2021 to see a genuine recovery in economic activity. In any case, 2021 will not be able to make up for all of the downturn in 2020.
The ECB has unveiled huge stimulus plans to kick start the economy, paying banks to lend to ensure cash keeps flowing to companies and households.
Decision makers at the Frankfurt-based central bank have also committed to buying more than €1 trillion of debt to help reduce the cost of borrowing across the bloc.
Euro-zone finance ministers last weekend ducked a major decision on sharing the debt burden of fighting the Corona-virus.
The deal will open up precautionary credit lines of up to €240 billion, a potential €200 billion increase in lending by the European Investment Bank and a temporary EU unemployment scheme worth €100 billion.
But they failed to reach a deal on the so-called “Corona-bonds, a joint debt instrument designed to share the borrowing costs of the economic recovery.
The Euro-zone committed the EU to fund what would be a “temporary, targeted and commensurate with the extraordinary costs of the crisis and help spread them over time through financing”.
The biggest battle was over whether access to the European Stability Mechanism would come with the need to implement tough economic reforms or austerity measures.
Both Italy and the Netherlands claimed a victory after the meeting bought a temporary halt to the bitter row over the bloc’s response to Corona-virus.
The Dutch said conditions will remain in place and the Italians claimed the opposite, leaving the fudge unlikely to allow Rome to access the emergency funds in the future.
Express UK / ABC Flash Point News 2020.