DesPardes + PKonweb

‘The Great Lockdown’ Pushing World Toward Great Depression Era of 1930s

World Bank expects Pakistan’s economy to shrink and suffer a painful decline in per capita income

SoDATA — The Washington-based International Monetary Fund (IMF) says:

A) Global economy will this year likely suffer the worst financial crisis since the Great Depression. The Fund expects a “partial recovery” in 2021, but this is conditional on an improvement in the health crisis.

B) The IMF now expects the global economy to contract by 3% in 2020. By contrast, in January it had forecast a global GDP (gross domestic product) expansion of 3.3% for 2020. The Covid-19 pandemic will therefore likely impact its pre-virus forecast by 6.3%. In dollar term, the contraction could be anywhere between 5.4 trillion and 6 trillion.

C) A partial recovery is projected for 2021, with considerable uncertainty about the strength of the rebound.

D) The IMF has dubbed the current crisis “the Great Lockdown”. It says “this is a crisis like no other.” “The magnitude and speed of collapse in activity that has followed (the lockdown) is unlike anything we’ve experienced in our lifetimes.”

E) There’s also severe uncertainty about the duration and intensity of the economic shock, and stimulating economic activity is more challenging given the required social distancing and isolation policies. 

F) The IMF has received “an unprecedented number of calls for emergency funding.” Out of its 189 members, more than 90 of them have asked for financial support.

The fund, which provides financing to members which are struggling economically, has $1 trillion in lending capacity. 

G) Besides IMF, the World Trade Organization (WTO) says global trade will contract by between 13% and 32% this year. The Organization for Economic Coordination and Development (OECD) has also warned the economic hit from the virus will be felt “for a long time to come.”

H) Last month, Moody’s rating agency forecast that instead of an over 3 percent growth in 2020, world economy will now see negative growth due to the pandemic.

I) A recently published position paper on Pakistan economy says it is inherently unable to face the major shock of negative global growth caused by the pandemic, and therefore needs more than an oomph with the recently announced relief and stimulus package by the government. Pakistan is one of the 90 countries that has asked IMF for $4 billion financial support amid reports it is planning to seek debt restructuring due to causes beyond control.

J) Pakistan has a liquidity problem which can become a solvency issue, experts say.

K) In a report released on Sunday, the World Bank says it has anticipated Pakistan would fall into recession for the first time in 68 years due to the devastating impact of the virus. The global lender expected the economy to shrink and suffer a painful decline in per capita income.

With original report in CNBC