It is being now referred to as the ‘Great Lockdown’ as the economic situation could be similar to the ‘Great Depression’ over ninety years ago. The IMF and the World Bank have now forecast the worst recession for countries around the world.
The annual World Economic Outlook released by the IMF suggests a dismal year ahead stating that the global economy could experience the worst recession since the Great Depression. This economic slump would dwarf the 2008 financial crisis resulting in an unprecedented loss of output. According to the report, the Great Lockdown is expected to shrink global growth dramatically.
The US and European countries are expected to suffer the most among the developed countries, shrinking by over 5.9 and 7.5 percent respectively. In fact, all countries are expected to face a downward trend with a few exceptions such as China and India as their economies could growth by 1.2 and 1.9 percent respectively this year. China – where the virus originated and spread worldwide – has registered a decline in growth for the first time in near a decade.
With regard to Pakistan, the report has projected a bleak economic outlook. The country’s economy is expected to see a negative 1.5 percent growth rate. This would be the first time in 68 years that the country would not post any positive growth. The State Bank of Pakistan has stated that a growth of 3.3 percent event before the pandemic was unlikely and now socio-economic indicators are being revised.
The IMF expects the economy to rebound and grow by two percent while the global economy could see a 5.8 percent growth next year but all forecasts are unlikely at the moment. The inflation rate could spike and reach around 11.1 percent, while the unemployment rate could also rise to 4.5 percent. The current account deficit could also increase to 2.4 percent next fiscal year. All the gains achieved by the government’s economic team have been erased and now we have to start afresh to revive the economy.
There is uncertainty over whether the pandemic would fade away in the second half of 2020 and in such a scenario and effective containment measures, the global economy could see a 5.8 percent growth rate in 2021. A partial recovery is likely next year but much worse outcomes are expected. The strength of the rebound is also unknown but it is certain the pandemic will scarring effects on developing economies which could persist for years.
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