The International Monetary Fund lowered its global growth forecast for this year and next in the wake of “The Great Lockdown.”
The IMF forecasts a decline of 5% in 2020. The UK economy is expected to contract by over 10% in 2020. Italy, France, and Spain are expected to decline even more.
Previous April forecasts were a 6.5% decline for the UK and 3% for the world. Stay-at-home orders and social distancing have sapped consumer spending.
The IMF predicts people will do more “precautionary saving,” reducing their consumption.
The report anticipates more economic damage, with firms going out of business and people being unemployed for extended periods of time, suggesting it may be harder for economic activity to rebound.
For businesses that do survive, their efficiency will decline due to the steps they will be required to take so as to improve safety and hygiene, reducing the risk of workplace transition of the coronavirus.
The IMF believes the biggest contractions will take place in Europe. The IMF has downgraded the forecasts for all 16 individual economies for which it gives projections.
The IMF changed India’s forecast the most, predicting a 4.5% contraction. The IMF does, however, anticipate a 1% increase for China.
“This is the worst recession since the Great Depression,” Gita Gopinath, the IMF’s chief economist, told reporters at a briefing. “No country has been spared.”