Recent projections suggest that the economic damage unleashed by COVID-19 on countries across the world is worse than expected. In it’s June 2020 update, the IMF now projects that global growth will contract by 4.9% in 2020 vis-a-vis 3% in it’s April 2020 World Economic Outlook . As the IMF notes:
The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020.
The OECD, in its June 2020 outlook, offers equally grim predictions and highlights the magnitude of the economic recession across the world based on two scenarios – (1) the current pandemic has a time-bound single wave (‘single hit’) (2) the current pandemic is followed by a second wave towards the end of 2020 (‘double hit’)
Policy-makers across the world thus face a monumental challenge – how to cope with the pandemic while dealing with one of the most severe recessions in living memory. Whether governments can muster the imagination, political will and resources to deal with a pandemic-induced economic crisis remains to be seen.