SINGAPORE (Apr 15): The International Monetary Fund (IMF) has slashed its 2020 global growth forecast to -3% from its previous prediction of 3.3% announced in January.
This "extraordinary revision over such a short period of time", follows the uncertainty from the Covid-19 pandemic, notes the macroeconomic watchdog.
The health crisis has resulted in an economic downturn which is panning out to be the worst global recession since the Great Depression between 1929 and 1939.
"As countries implement needed containment measures to control the pandemic, the world has been put in a great lockdown. The magnitude of collapsing activity that has followed is unlike anything experienced in our lifetimes," said IMF economic chancellor Gita Gopinath in a press conference on Tuesday.
"This is a crisis like no other, which means there are substantial uncertainties about the impact it will have on people’s lives and livelihoods. A lot will depend on the epidemiology of the virus, the effectiveness of containment measures and the development of therapeutics and vaccines – variables which are very hard to predict," she added.
While the watchdog anticipates a 5.8% growth rebound in the global economy if the pandemic fades by the second half of the year, it says global growth will still be below its initial 2021 forecast.
This is as the cost of the pandemic is expected to climb as high as US$9 trillion ($12.7 trillion) between 2020 and 2021. This is greater than the combined size of the Japanese and German economies.
Economies are already crumbling from the weight of the health crisis. For instance, economic growth in the US is expected to contract 5.9% this year while Europe – where the outbreak has been “as severe as in China’s Hubei province” where the virus strain originated from – is slated to have a 7.5% reduction in output.
Developing economies are likely to perform slightly better, says the IMF. As such, the Asean-5 comprising Indonesia, Philippines, Thailand and Vietnam is forecast to shrink by 0.6%.
Meanwhile, China is slated to grow by 1.2% - its lowest growth rate in 30 years.
Singapore has not been spared the wrath of this global pandemic, and is bracing itself for a massive slowdown this year.
"As the IMF emphasises, there is considerable uncertainty – so we hope for the best, and begin to prepare to emerge stronger from the crisis. But at the same time, we must be prepared for even rougher seas," noted Deputy Prime Minister and Finance Minister Heng Swee Keat in a Facebook post on Tuesday.
Drawing reference to the IMF's report, Heng added that Singapore "must take immediate measures to slow the contagion [of Covid-19] and protect lives, and give full support to our healthcare system".
These measures will take a toll on the economy in the short-term, but are "important for the long-term health of our people," he stressed.
In the meantime, Heng says the government is doing what it can to cushion the impact of the slowdown on households and businesses through its three Budgets that collectively put forth fiscal support amounting to $59.9 billion.
IMF's Gopinath noted that countries should continue to provide fiscal lifelines to households and businesses and throughout the containment phase "to minimize persistent scars that could emerge from subdued investment and job losses".
"This is truly a global crisis as no country is spared," reflected Gopinath.
"The pandemic may not recede in the second half of this year, leading to longer containment periods, worsening financial conditions and further breakdowns in global supply chains," she adds.
"However, there are some hopeful signs that this health crisis will end as countries seemingly succeed in containing the spread of the virus using social distancing and contact tracing, at least for now".
