US (-5.9%) and eurozone (-7.5%) will suffer the harshest recessions since the Great Depression, according to IMF

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No developed economy escapes the recession in 2020, while China (1.2%) and India (1.9%) will barely grow this year.

The impact of the Covid-19 pandemic and the containment measures implemented will drag practically all of the world economies into recession in 2020, with particular intensity in developed countries, where the eurozone and the United States will record a drop in GDP 7.5% and 5.9%, respectively, according to the new forecasts of the International Monetary Fund (IMF).

In the latest edition of its report ‘World Economic Outlook’, the international institution warns that the current crisis, which it calls the ‘Great Seclusion’, “is not like any previous one” and will have a much greater impact than that caused by the Great Recession during the financial crisis of the past decade.

The adverse effects of the pandemic on the economy will be widespread and no developed economy will be able to avoid the recession, including all European and American ones, as well as Japan, South Korea or Australia, while most of the emerging and developing ones will also suffer. falls in GDP, with the exception of a handful of exceptions such as China (+ 1.2%), India (+ 1.9%) or Indonesia (+ 0.5%).

In this way, the IMF predicts a fall in the GDP of the advanced economies of 6.1% in 2020, which will recover only in part in 2021, with an expansion of 4.5%, compared to the growth forecast of 1.6 % in both exercises last January.

In the case of emerging and developing economies, the new IMF forecasts point to a 1% drop in GDP in 2020, but a strong rebound of 6.6% in 2021, compared to previous expansion projections of 4 , 4% and 4.6%, respectively.

HISTORICAL RECESSION IN EUROPE AND THE USA.
In the case of the eurozone, the new IMF forecasts point to a record GDP contraction of 7.5% in 2020, with a recovery of 4.7% in 2021, in contrast to the forecast of last January, when the Fund anticipated an expansion of 1.3% and 1.4% respectively.

Among the main economies of the euro bloc, Italy and Spain are the worst stops in the review, with falls in GDP of 9.1% and 8%, respectively, when last January the IMF predicted for 2020 a growth of 1.6% for Spain and 0.5% for Italy. Looking ahead to 2021, the institution projects a rebound of 4.8% in the Italian economy and 4.3% in the case of the Spanish one.

Likewise, Germany sees its growth forecast cut from 1.1% last January to a 7% drop in 2020, with an expansion of 5.2% next year. For its part, France will suffer a contraction of 7.2% this year to rebound from 4.5% in 2021, when the January forecast pointed to an expansion of 1.3% in both years.

As a consequence of the drastic worsening of activity, the unemployment rate in the euro area, which started 2020 at lows in the last decade, will rise this year to 10.4% from 7.6% in 2019, although, according to the scenario IMF base, in 2021 it would be partially corrected, up to 8.9%.

In this sense, the IMF forecasts a strong increase in unemployment in Spain, from 14.1% in 2019 to 20.8% in 2020, which would drop to 17.5% next year, while in Italy it will rise to 12, 7% in 2020 from 10% last year and will drop to 10.5% in 2021.

With respect to the United States, the new projections of the IMF contemplate an unprecedented drop in GDP in 2020, when the world’s largest economy would fall by 5.9%, although a year later it would manage to recover only part of the lost wealth, with an expected expansion 4.7%.

The US unemployment rate, which in recent years had been kept at minimums considered compatible with full employment, would shoot up this year to 10.4%, to drop slightly to 9.1% in 2021, when in 2019 it was just under 3.7%.

For its part, Japan will see its GDP fall 5.2% this year and it is expected to rebound 3% in 2021, which will make its unemployment rate rise in 2020 to 3% from 2.4% last year. , to return in 2021 to 2.3%.

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