Global slump will be WORSE than feared: IMF warns of catastrophic hit to jobs with £10TRILLION set to be wiped off the global economy
The coronavirus crisis is set to wipe £10trillion off the global economy as it triggers a deeper recession than previously feared, according to the International Monetary Fund.
The Washington-based watchdog warned just ten weeks ago that the pandemic would lead to the worst global economic downturn since the Great Depression.
But as stock markets around the world tumbled again, it predicted the fallout would be even more ‘severe’.
Recession fears: The IMF yesterday warned that the fallout from the pandemic would be even more ‘severe’ than its earlier forecasts
The outlook for much of the world – including Britain – was downgraded. But the IMF said the UK would fare better than most major economies in Europe, suffering more than Germany but less than France, Italy and Spain.
The fund also warned the UK would borrow more than £400billion over the next two years as the cost of dealing with the outbreak spirals.
The IMF now expects the global economy to suffer a £10trillion hit this year and next. Slashing this year’s growth forecasts for all 16 countries listed in the report, including the UK, France, Germany and the US, it also warned of a ‘catastrophic’ effect on jobs.
‘A crisis like no other’: IMF chief economist Gita Gopinath
It referred to estimates from the International Labour Organisation that the decline in hours worked in the first half of the year was equivalent to the loss of more than 300m jobs worldwide.
Overall the IMF said the global economy will shrink 4.9 per cent this year, compared with a 3 per cent contraction it had forecast in April.
The recovery will be slower than it had thought, as longer lockdowns, social distancing and ‘greater scarring’ from businesses going bust or cutting jobs take their toll
Gita Gopinath, the IMF’s chief economist, said: ‘The pandemic put economies into a Great Lockdown which helped contain the virus and save lives but triggered the worst recession since the Great Depression.
‘This crisis is a crisis like no other, and the recovery will be a recovery like no other.’
She said that in the absence of a medical solution – a vaccine or effective treatment – the strength of recovery is ‘highly uncertain’.
The watchdog predicted the UK economy will shrink 10.2 per cent this year, significantly worse than the 6.5 per cent fall it forecast two months ago, before bouncing back 6.3 per cent next year.
But it also offered some scant consolation, indicating that Britain should no longer be singled out as the sick man of Europe.
It predicted the UK will fare significantly better than France and Italy, which both are expected to contract 12.5 per cent this year, and Spain – heading for a 12.8 per cent decline. Damage to the UK this year would be on a par with that experienced in the eurozone.
This is at odds with a separate report released by the Paris-based OECD two weeks ago, which warned Britain would suffer the worst recession of the world’s leading economies.
It predicted UK GDP would shrink 11.5 per cent this year, assuming there is no second wave of infections.
The damning report was seized on by opposition parties, which pointed out that Britain had one of the worst death tolls and infection rates, while also facing the biggest economic hit.
The IMF’s previous global outlook was issued in mid-April.
Since then official figures have laid bare the damage inflicted, with Britain hit by a record 20.4 per cent fall in GDP in April and more than 600,000 people falling off the payroll between March and May.