Under the assumption that the Covid-19 pandemic and the required containment measures are implemented and peak in the second quarter of the year, the International Monetary Fund (IMF) predicts global growth will contract by 3% this year.

This is a downgrade of 6.3 percentage points from January 2020, a major revision for a very short period of time, IMF economist Gita Gopinath lamented in a webcast on April 14. This, she said, made “the great lockdown” the worst recession since the great depression, and “far worse” than the global financial crisis of 2008/9.

Assuming that the pandemic fades in the second half of the year and that policy actions taken globally are effective in preventing widespread bankruptcies, extended job losses and system-wide financial strains, the IMF projects global growth will rebound to 5.8% in 2021.

However, the projected recovery in 2021 is only partial, as the level of economic activity is projected to remain below the level projected for next year.

Overall, the cumulative loss to global gross domestic product (GDP) across 2020 and 2021, from the pandemic crisis, could be around $9-trillion, Gopinath said.

This is greater than the economies of Japan and Germany combined.

Countries reliant on tourism, travel and entertainment for their growth are experiencing major disruption, and emerging markets and developing economies face additional challenges – unprecedented reversal in capital, major currency pressures, all while simultaneously coping with weaker health systems and much lower fiscal space to support their respective economies.

“The magnitude and speed of collapse that has followed since the outbreak of Covid-19 is unlike anything experienced in our lifetimes. This is a crisis like no other, which means there is substantial uncertainty of the impact that it will have on people’s lives and livelihoods,” she said.

However, a lot of factors will be dependent on the epidemiology of the virus, the effectiveness of containment measures and the development of therapeutics and vaccines, which Gopinath acknowledged “are very hard to predict”.

In addition, policy makers are responding in “unprecedented manners” by helping households, firms and financial markets.

For the first time since the great depression, Gopinath lamented that both advanced economies, as well as emerging and developing economies, are in recession. For 2020, advanced economies are projected to contract by 6%, while emerging and developing economies are predicted to contract by 1%, or contract by 2.2% excluding China.

Income per capita is projected to shrink in over 170 countries, although the IMF projects partial recoveries for advanced, emerging and developing economies in 2021.

On the other hand, should the pandemic not recede in the second half of this year, it will lead not just to longer containment periods, but will also bring the onset of worsening financial conditions and further breakdowns in global supply chains.

In that case, global GDP is projected to fall even further by an additional 3% in 2020 and, if the health crisis rolls over to 2021, it could reduce global GDP by an additional 8% compared with the baseline projections of the IMF.

Within sub-Saharan Africa, South Africa is projected to contract by -5.9% in 2020 but grow by 4% in 2021. This marks a -6.6% and 3% difference from projections made in January 2020.

Taking this into account, Gopinath emphasised that countries needed to flatten the spread of the Covid-19 virus by using lockdowns, thereby allowing health systems to cope with the crisis, which then commits a country to a resumption of economic activity.

In this sense, she indicated that “there is no trade-off” between saving lives and saving livelihoods.

She, on behalf of the IMF, encouraged countries to continue to generously support their health systems, perform widespread testing and to refrain from trade restrictions on medical supplies.

“Global efforts must ensure that when therapies and vaccines are developed, both the rich and poor nations alike have access. While the global economy is in shutdown, policy makers will need to ensure that people are able to meet their basic needs and that businesses can pick up once the acute phases of the pandemic pass,” she elaborated on Tuesday.

She added that the large, timely and targeted fiscal, monetary and financial policies already taken by many policymakers have been lifelines to households and businesses, and added that this support should continue throughout the containment phase to minimise persistent scars that could emerge from subdued investment and job losses during this deep recession.

“Policymakers must also plan for the recovery as containment measures come up, policies should shift swiftly to supporting demand, incentivizing firm hiring and repairing balance sheets on private and public sectors to aid the recovery,” she elaborated.

Commensurate with the scale and speed of the crisis, Gopinath emphasised that the domestic and international policy responses need to be large, rapidly deployed and speedily recalibrated as new data becomes available.

Additionally, a fiscal stimulus that is coordinated across countries that have fiscal space will magnify the benefits for all economies, and multilateral cooperation is encouraged to ensure the health of the global economy.

Within this line, the IMF is actively deploying its $1-trillion lending capacity to support vulnerable countries, including through rapidly dispersing emergency financing and debt service relief to the poorest member countries. The IMF called on official creditors to do the same.