‘We are now facing the grim reality of a severe recession not seen since the Great Depression’
Losses to the global economy consequent to the crippling Covid-19 lockdown will be between $5.8 trillion and $8.8 trillion this year, the Asian Development Bank said on Friday.
The forecast by ADB is grimmer as it is more than double its earlier estimates as the Great Lockdown across the globe to combat the spread of the epidemic appears to persist for a protracted period than initially forecast.
The ADB’s forecast, equal to 6.4 per cent to 9.7 per cent of global gross domestic product, was worse than projections in April when it said the global economy could suffer between $2.0 trillion and $4.1 trillion in losses, depending on how long containment measures were in place.
“This new analysis presents a broad picture of the very significant potential economic impact of COVID-19,” said ADB Chief Economist Yasuyuki Sawada. “It also highlights the important role policy interventions can play to help mitigate damage to economies.”
ADB’s estimate of the epidemic-inflicted worldwide economic damage resonates with the forecasts made by the International Monetary Fund and the United Nations.
“The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9.0 trillion dollars, greater than the economies of Japan and Germany, combined,” said Gita Gopinath, chief economist of the IMF.
“Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 per cent,” said Gopinath.
UN World Economic Situation and Prospects update echoes the views of both ADB and the IMF.
“The global economy is expected to lose nearly $8.5 trillion in output over the next two years due to the Covid-19 pandemic, wiping out nearly all gains of the previous four years,” said UN chief economist Elliott Harris.
“We are now facing the grim reality of a severe recession of a magnitude not seen since the Great Depression,” Harris said.
Measures to contain the spread could inflict $1.7 trillion to $2.5 trillion in economic losses in Asia, and between $1.1 trillion and $1.6 trillion in China, the ADB said.
Travel restrictions and lockdowns will likely cut global trade by $1.7 trillion to $2.6 trillion and put between 158 million and 242 million people out of work, the ADB said.