In its latest report, the International Monetary Fund said strong multilateral cooperation will be essential to overcome the effects of the Covid-19 pandemic.
The International Monetary Fund (IMF) projected the global economy would shrink by 3 percent in 2020 amid the global coronavirus pandemic, according to a report released on Tuesday.
In its latest World Economic Outlook – released before the annual conference of the IMF and World Bank on Wednesday, the fund downgraded its growth forecast by 6.3 percentage points from its previous report as isolation, lockdowns and widespread closures to contain the virus hit the economy.
"It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago," stressed the report.
Growth was forecast to recover next year under the assumption that the pandemic subsides in the second half of 2020 and containment efforts are gradually unwound.
The global economy is projected to expand by 5.8 percent in 2021 as economic activity normalises, helped by policy support, according to the report.
Pointing to the extreme uncertainty surrounding the global growth forecast, the report underlined that many countries faced a multi-layered crisis comprising of health shocks, domestic economic disruptions, plummeting external demand, capital flow reversals and a collapse in commodity prices.
The report also highlighted the importance of effective policies to forestall worse outcomes. Though this would take a short-term toll on economic activity, it would be an important investment in long-term human and economic health, it said.
Strong multilateral cooperation will be essential to overcome the effects of the pandemic, including to help financially constrained countries facing twin health and funding shocks and for channelling aid to nations with weak health care systems, it noted.
The report called on countries to urgently work together to slow the spread of the virus and develop a vaccine and therapies to counter the disease.
The report predicted that advanced economies – especially those experiencing widespread outbreaks and deploying containment measures – will contract this year, including the US (minus 5.9 precent), Japan (minus 5.2 percent), UK (minus 6.5 percent), Germany (minus 7 percent), France (minus 7.2 percent), Italy (minus 9.1 percent) and Spain (minus 8 percent).
The Eurozone's growth forecast was also reduced to minus 7.5 percent for 2020, while the economy in the bloc is expected to expand by 1.4 percent next year.
The fund projected that emerging markets and developing economies would shrink by 1 percent this year. The downward revision from 4.4 percent stemmed from large domestic disruptions anticipated in economic activity due to the Covid-19 pandemic.
All countries in this group face a health crisis, severe external demand shock, dramatic tightening in global financial conditions and a plunge in commodity prices, it underlined.
Growth among emerging markets and developing economies is projected to rebound to 6.6 percent in 2021.
In China, indicators such as industrial production, retail sales and fixed asset investment suggest that the contraction in economic activity in the first quarter could have been about 8 percent year-on-year, the report said.
The Chinese economy is projected to grow at a subdued 1.2 percent in 2020 and 9.2 percent in 2021.
The report predicted that Turkey would contract 5 percent this year and grow by 5 percent next year.
Turkey's year-end inflation rate is projected to reach 12 percent in both 2020 and 2021.