IMF: the pandemic will plunge the world into a new Great Depression

World GDP will record -3% growth in 2020: in Asia it will stop at zero. Collapse of Japan and strong slowdown of India. China will grow by 1.2%, the worst since 1976. Chinese small and medium-sized enterprises have lost 70% of their earnings. Tokyo and Washington evaluate "decoupling" with Beijing. The Fund wants greater cooperation.


Hong Kong (AsiaNews) – The global economy will register -3% growth in 2020 because of the pandemic, the worst collapse since the Great Depression of the 1930s, the International Monetary Fund (IMF) reveals. The gross domestic product in Asia will stop at zero, with a sharp slowdown in China and India, as well as in the Japanese economy.

In the next two years, world GDP could lose 9 trillion dollars. A 20% rebound is expected in 2021 if the coronavirus is defeated in the second half of the year. Recovery, however, will not bring the global economy back to pre-crisis levels, which could only be achieved in 2022.

The world is in quarantine. Restrictions on the movement of people and economic activities imposed in the vast majority of countries have derailed the global goods chain, with highly recessive effects.

Among the advanced economies in Asia, Japan is the one that will suffer the largest backlash (-5.2%), together with Taiwan (-4%). South Korea will have a negative growth of 1.2%. Among the emerging economies, Thailand will have an estimated growth of -6.7%, hit by the collapse of the tourism sector. India will continue to grow, but with a strong contraction (+ 1.9%).

Chinese GDP will slow down to 1.2%, far from 6.1% in 2019, and from 6% expected at the beginning of the year. For the Chinese it is the worst since 1976, when the country divested itself of the cultural revolution and launched a vast program of economic openings. Compared to 2019, the Chinese economy recorded -8% growth in the first quarter of this year.

A recovery to 9.2% is expected for 2021, but the picture is currently particularly bleak. China's recovery will still depend on foreign demand, which has seen a sharp drop - Beijing's exports fell 13.3% in the first quarter.

The government's large infrastructure plans do not directly favor small and medium-sized enterprises, which employ most of the national workforce. They also struggle to obtain bank loans on favorable terms, despite the fact that the authorities have taken measures to facilitate the issuing of incentive driven packages.

According to a study by the Qinghua University, the income of smaller Chinese companies dropped nearly 70% in March. The sectors most affected are the educational and hospitality sectors (hotels, restaurants, bars, etc.).

Then there is the problem of possible "decoupling". Some countries are now actively considering how to decrease their dependence on the Chinese manufacturing industry. Economic separation from Beijing is being proposed by the United States and Japan (a little less by Europe), although it appears difficult to achieve, given that it would cost billions of dollars.

Instead, the Fund recommends greater international cooperation, especially with regard to the distribution of vaccines and anti-viral treatments: for the IMF, the containment of the pandemic is the basis for reviving the world economy.

All states, especially emerging economies, need to invest more in national health systems. These measures must be accompanied by actions to support workers and businesses. Central banks must continue to pump liquidity into the financial system, and the debts of many developing countries must be written off.

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