Recent reports from the International Monetary Fund, United Nations Conference on Trade and Development, and World Bank show warnings that consequences of the coronavirus pandemic may be worse than anticipated.
According to the International Monetary Fund’s latest official World Economic Outlook, 2020’s global Growth is projected at -4.9 percent, far lower than their original -2 percent prediction. Around 5,000 large, global companies have plans to halt all foreign investments due to drops of nearly 40 percent on average in earnings, resulting in particular from extended lockdowns around the world.
The implications of this halt in foreign investments could lead to a reduction of up to 40 percent in foreign direct investment (FDI), warns the United Nations trade body. This drop would set FDI at lower than $1 trillion, a minimum it hasn’t reached since 2005.
The United States’ economy—the world’s largest—is expected to drop 8 percent this year. Other major economic powers also see forecasted declines ranging from China, which is expecting to end the year at a 1 percent gain, to countries around Europe, some of which are expecting declines in the 10 percent range. Based on predictions by the IMF, the pandemic will have cost the global economy $12.5 trillion in lost output by the end of 2021.
Although the outlook is still uncertain, World Bank’s President, David Malpass, has made it clear in public statements that even in the best-case scenario, data suggests that the world will see its deepest global recession since World War II.
Particularly poor countries around the globe are expected to encounter substantial issues resulting from COVID-19. In the month of June alone, the IMF has approved 70 requests for emergency financial aid, the most recent being a $148 million loan for Guinea to alleviate the cost of medical programs. Low-income citizens of these countries are also expected to face setbacks in wages, reversing the trend after years of steady improvement.
There is, however, still hope that new breakthroughs could prevent such dramatic economic decline. The development of an effective and accessible vaccine, for example, could render obsolete such unsettling forecasts, The Washington Post reports.
Works Cited
"A Crisis Like No Other, An Uncertain Recovery." International Monetary Fund, June 2020, www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020#:~:text=Global%20growth%20is%20projected%20at,Economic%20Outlook%20(WEO)%20forecast.&text=In%202021%20global%20growth%20is,19%20projections%20of%20January%202020. Accessed 29 June 2020.
Lynch, David J. "IMF says global economic collapse caused by coronavirus will be even worse than feared." The Washington Post, 24 June 2020, www.washingtonpost.com/business/2020/06/24/imf-global-economy-coronavirus/. Accessed 29 June 2020.
Rai, Dipu. "How COVID-19 brought the world economy to its knees." India Today, 26 June 2020, www.indiatoday.in/diu/story/how-covid19-brought-world-economy-to-its-knees-1693119-2020-06-26. Accessed 29 June 2020.