Is Coronavirus causing a global recession in 2020?

Is Coronavirus causing a global recession

The International Monetary Fund (IMF) predicts a historic collapse of the world economy in 2020 at -3%. The United States is expected to experience a violent fall in its GDP (-5.9%). Is Corona virus causing a global recession where the European economy would be hit hard by the recession (-7.5%).

For the IMF chief economist Gita Gopinath, this is “the deepest recession since 1929,” she says, “the world has changed dramatically in the last three months since our last update of the global economic outlook in January. A rare disaster, the coronavirus pandemic, has resulted in the tragic loss of many lives. While countries have taken quarantine and social distancing measures to curb the pandemic, the world has entered into great confinement. The scale and speed of the ensuing meltdown are different from anything we have experienced in our lives“.

A historic recession in the United States

Because of the health crisis linked to the coronavirus, the United States is entering a historic economic recession in 2020. After ten years of uninterrupted growth., the U.S. GDP fell by 4.8% in the first quarter.

This is a historic recession, not seen since 2008, it has already caused more than 58,000 deaths in the country, the number of deaths related to Covid-19 has now exceeded the number of American soldiers killed in two decades during the conflict in Vietnam.

The second quarter should see a much sharper fall. Indeed, it was only at the end of this quarter that the world’s leading economy was gradually brought to a halt, in the face of the virus’ spread in the country.

A recovery plan to save the Eurozone

The Covid-19 pandemic is hitting Europe hard, with more than 160,000 deaths from the virus. A reality that prompts the 27 countries of the European Union to take emergency measures to fight the disease and save the economy.

To pull the Old Continent out of an unprecedented recession, the European Commission wants to borrow 750 billion euros on the markets. Never before in the history of the Union, such a sum has been raised on the behalf of the EU.

While interest payments will begin as early as 2021, the repayment of the borrowed sums will not take place until 2028 and is expected to be completed in 2058.

Italy and Spain take the lion’s share of this plan and could receive more than €172 billion and €140 billion respectively (split between grants and loans).

The coronavirus pandemic has taken a heavy toll on the economies of these countries, whose economies are heavily dependent on tourism, which has been undermined by containment measures.

A disturbing situation in developing countries

The situation in emerging economies is explosive. IMF economists predict a smaller decline in GDP in 2020 (-1%) in comparison to developed countries. Nevertheless, the weight of some countries such as China and its neighbors in the world economy remains colossal. As for China, the economic forecasters anticipate a very sharp slowdown of its activity from 6.1% increase in 2019 to 1.2% increase in 2020.

India is also expected to experience a sharp slowdown in activity, from 4.2% in 2019 to 1.9% in 2020.

Asian countries are expected to suffer greatly from the collapse of the two economic giants dominating the region. Is Corona virus causing a global recession is a big question?

In Africa and the Middle East, fears are also present. The fall in oil prices has led to abyssal losses for some countries that are highly exposed to oil prices. In addition, the incapacity of health systems to fight this global pandemic is causing fears of the worst in many African countries.

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