Well before the sudden irruption of the COVID-19 pandemic, we entered a phase unknown before, that of a slowdown in the world economy. The economies north of the MENA region were first to feel the pinch of the Dollar. The MENA petro-economies know this since the advent of oil. What they did not perhaps know is that it is the worst economic downturn since the Great Depression.
A small story before going into the latest IMF blog of April 14, 2020. In Europe, the German machine seemed running out of steam, with a few small cracks appeared by the questioning the German miracle. The locomotive of Europe tired by putting up so much effort trying to pull and strengthen the stragglers of the union that are Greece, Portugal, Spain, and other Eastern countries.
These countries however were integrated into the European Union for geopolitical reasons aimed at creating a strong Europe in the face of the communist challenge on the one hand and US exuberance on the other. Without going into the technical details of the financial mechanisms and destabilization processes devised by the US, the thinly veiled objectives of the dominant states are first security imperatives and eventually the long-term control over global wealth.
Moreover, the countries lagging above have brought nothing useful to the EU if not ever more unemployed and care to manage. After Brexit, all that remains is Germany and France to pull the EU train. Germany, knowing that these countries were plagued by chronic corruption and mismanagement, did not want to sacrifice itself to fish them, and this is understandable because prestige politics is never good in bad weather. Indeed, the €500 billion injected by the state into the banks was the lifeline to avoid the crash of the entire German financial system and thus the collapse of the European Union.
So here is Gita Gopinath who wrote The Great Lockdown: Worst Economic Downturn Since the Great Depression.
The world has changed dramatically in the three months since our last update of the World Economic Outlook in January. A rare disaster, a coronavirus pandemic, has resulted in a tragically large number of human lives being lost. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.
April World Economic Outlook projects global growth in 2020 to fall to -3 percent.
This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods. A lot depends on the epidemiology of the virus, the effectiveness of containment measures, and the development of therapeutics and vaccines, all of which are hard to predict. In addition, many countries now face multiple crises—a health crisis, a financial crisis, and a collapse in commodity prices, which interact in complex ways. Policymakers are providing unprecedented support to households, firms, and financial markets, and, while this is crucial for a strong recovery, there is considerable uncertainty about what the economic landscape will look like when we emerge from this lockdown.
Under the assumption that the pandemic and required containment peaks in the second quarter for most countries in the world, and recedes in the second half of this year, in the April World Economic Outlook we project global growth in 2020 to fall to -3 percent. This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.
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