With the outbreak of COVID-19, life has come to a standstill. This huge threat to human life has ushered in multiple crises. According to IMF chief economist Gita Gopinath, the coronavirus pandemic is pushing the global economy into its deepest recession in a century, cutting world output by three percent this year. She presented the latest forecasts in the World Economic Outlook.
“The world has changed dramatically with the outbreak of COVID-19. There is a lot of uncertainty and a lot depends on the epidemiology of the virus, the effectiveness of containment measures and development of therapeutics and vaccines,” she said.
Gita Gopinath on economic recession: Highlights
- If it is assumed that under the pandemic and required containment peaks in the second quarter in most countries in the world and recedes in the second half of this year then the global growth in 2020 falls to minus 3% which is a downgrade of 6.3 % points from Jan 2020, a major revision over a very short period.
- If it is assumed that the pandemic fades in the second half of 2020 and that policy actions taken, around the world, are effective in containing the virus and are able to prevent bankruptcy, and extended job losses the global growth in 2021 will rebound to 5.8. However, this recovery will only be only partial as it is below the level projected for 2021 before the virus hit.
- The cumulative loss to the global GDP over 2020 and 2021 from the pandemic crisis should be around 9 trillion dollars, greater than the economies of Japan and Germany combined.
- This is truly a global crisis as no country is spared. For the first time since the great depression both advanced economies and emerging and developing economies are in a recession. For 2020, for both the growth is projected to be it negative.
- This is a baseline scenario and things will be different in extreme conditions.
Gita on extreme conditions
Gita also explains the alternate scenario in extreme conditions that, “given extreme uncertainty around the duration and intensity of the health crisis there are changes that the pandemic may not recede in the second half of this year leading to longer containment period, worsening financial conditions and further breakdown in global chains in such cases global GDP will fall even further by an additional 3% in 2020 and if the health crisis roll cover into 2021 it can reduce the level of global GDP by an additional 8% compared to the baseline.”
Gita Gopinath also suggested measures that countries should take to manage the crisis effectively.
Steps that governments should take
- Focus on the health front. She supported lockdown as a measure to flatten the intensity of the spread of COVID-19 as it allows health systems to cope with this crisis which permits a resumption of economic activity.
- Widespread testing and no restrictions on medical supplies.
- To ensure that when therapies and vaccines are developed both rich and poor actions have immediate access.
- Policymakers will need to ensure that people can meet their basic needs and the businesses can pick up once the acute phase of the pandemic passes.
Who is Gita Gopinath?
Gita Gopinath is an Indian American economist. Since 2019, she has been the Chief Economist of the International Monetary Fund. In that role, she is the Director of the IMF’s Research Department and the Economic Counsellor of the Fund. She is now a naturalized American Citizen and an Overseas Citizen of India.
Born on 8 December 1971, she studied at Nirmala Convent School in Mysore. She did her BA from Lady Shri Ram College for Women, the University of Delhi in 1992 and received an MA degree in economics from the Delhi School of Economics, University of Delhi, in 1994. She completed an MA degree at the University of Washington in 1996. In 2001, she completed her PhD at Princeton University.
Awards and Honours
In 2011 she was chosen as a Young Global Leader by the World Economic Forum. In 2014, the International Monetary Fund, named her as one of the top 25 economists under 45. In 2018, she was elected as a fellow of the American Academy of Arts and Sciences and the Econometric Society. In 2019 she was awarded Pravasi Bharatiya Samman by the President of India, the highest honour for a person of Indian origin.
Picture Credit: Bloomberg.com
Saumya Tiwari is an intern with SheThePeople.TV