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I.M.F. Predicts Worst Downturn Since the Great Depression I.M.F. Predicts Worst Downturn Since the Great Depression
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WASHINGTON — The International Monetary Fund issued a stark warning on Tuesday about the coronavirus’s economic toll, saying that the world is facing its worst downturn since the Great Depression as shuttered factories, quarantines and national lockdowns cause economic output to collapse.WASHINGTON — The International Monetary Fund issued a stark warning on Tuesday about the coronavirus’s economic toll, saying that the world is facing its worst downturn since the Great Depression as shuttered factories, quarantines and national lockdowns cause economic output to collapse.
The grim forecast underscored the magnitude of the shock that the pandemic has inflicted on both advanced and developing economies and the daunting task that policymakers face in containing the fallout. With countries already hoarding medical supplies and international travel curtailed, the I.M.F warned that the crisis threatened to reverse decades of gains from globalization.The grim forecast underscored the magnitude of the shock that the pandemic has inflicted on both advanced and developing economies and the daunting task that policymakers face in containing the fallout. With countries already hoarding medical supplies and international travel curtailed, the I.M.F warned that the crisis threatened to reverse decades of gains from globalization.
In its World Economic Outlook, the I.M.F. projected that the global economy would contract by 3 percent in 2020, an extraordinary reversal from early this year, when the fund forecast that the world economy would outpace 2019 and grow by 3.3 percent. This year’s fall in output would be far more severe than the last recession, when the world economy contracted by less than 1 percent between 2008 and 2009.In its World Economic Outlook, the I.M.F. projected that the global economy would contract by 3 percent in 2020, an extraordinary reversal from early this year, when the fund forecast that the world economy would outpace 2019 and grow by 3.3 percent. This year’s fall in output would be far more severe than the last recession, when the world economy contracted by less than 1 percent between 2008 and 2009.
“As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown,” said Gita Gopinath, the I.M.F.’s chief economist. “The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.”“As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown,” said Gita Gopinath, the I.M.F.’s chief economist. “The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.”
The figures were released as the Group of 7 finance ministers and central bankers, who were supposed to meet in Philadelphia this week, held a virtual discussion on Tuesday to assess the global economic crisis.The figures were released as the Group of 7 finance ministers and central bankers, who were supposed to meet in Philadelphia this week, held a virtual discussion on Tuesday to assess the global economic crisis.
In a joint statement after the meeting, they pledged to coordinate their efforts to restore growth, protect jobs and reinforce the global financial system. They noted that the I.M.F. was prepared to deploy its $1 trillion lending capacity to help vulnerable economies cope with recessions and they endorsed a proposal to let poor countries suspend debt service payments. The broader Group of 20, which is also expected to convene virtually this week, must still sign off on the debt relief plan.In a joint statement after the meeting, they pledged to coordinate their efforts to restore growth, protect jobs and reinforce the global financial system. They noted that the I.M.F. was prepared to deploy its $1 trillion lending capacity to help vulnerable economies cope with recessions and they endorsed a proposal to let poor countries suspend debt service payments. The broader Group of 20, which is also expected to convene virtually this week, must still sign off on the debt relief plan.
“The scale of this health crisis is generating unprecedented challenges for the global economy,” the G7 officials said.“The scale of this health crisis is generating unprecedented challenges for the global economy,” the G7 officials said.
The United States is expected to take a severe hit, with the I.M.F. projecting that the American economy will contract by about 6 percent in 2020.The United States is expected to take a severe hit, with the I.M.F. projecting that the American economy will contract by about 6 percent in 2020.
The global group was skeptical about the prospect for a “V” shaped recovery in the United States, suggesting that a sharp rise in unemployment and disruptions to supply chains will keep the economy below its pre-virus trend next year.The global group was skeptical about the prospect for a “V” shaped recovery in the United States, suggesting that a sharp rise in unemployment and disruptions to supply chains will keep the economy below its pre-virus trend next year.
The impact is already evident in trade data, where slowing economic activity has caused global commerce to plummet. Tracking by S&P Global Panjiva published Tuesday showed global shipments of goods into the United States fell by 10.1 percent in March, the fewest number of monthly shipments since 2016. Consumer goods have been hit particularly hard, with shipments of furniture, apparel, steel and electronics falling by more than 15 percent last month compared with one year ago.The impact is already evident in trade data, where slowing economic activity has caused global commerce to plummet. Tracking by S&P Global Panjiva published Tuesday showed global shipments of goods into the United States fell by 10.1 percent in March, the fewest number of monthly shipments since 2016. Consumer goods have been hit particularly hard, with shipments of furniture, apparel, steel and electronics falling by more than 15 percent last month compared with one year ago.
Ms. Gopinath said that the loss of global output would be “far worse” than the 2008 financial crisis and that policymakers were facing an unusual predicament in that traditional stimulus measures are little match for a pandemic that is being fought with shutdowns and quarantines.Ms. Gopinath said that the loss of global output would be “far worse” than the 2008 financial crisis and that policymakers were facing an unusual predicament in that traditional stimulus measures are little match for a pandemic that is being fought with shutdowns and quarantines.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression,” she said.“It is very likely that this year the global economy will experience its worst recession since the Great Depression,” she said.
According to the I.M.F., the global economic contraction from 1929 to 1932 was approximately 10 percent. Advanced economies shrank by 16 percent during that period.According to the I.M.F., the global economic contraction from 1929 to 1932 was approximately 10 percent. Advanced economies shrank by 16 percent during that period.
Barry Eichengreen, the University of California, Berkeley, economist who is a scholar of the Great Depression, said there were several parallels between now and then. He pointed to the jobless rate in the United States, which he expects could top the 25 percent that was reached in 1933, and the global nature of the downturn, which could prolong the crisis as poor countries struggle to combat the virus.Barry Eichengreen, the University of California, Berkeley, economist who is a scholar of the Great Depression, said there were several parallels between now and then. He pointed to the jobless rate in the United States, which he expects could top the 25 percent that was reached in 1933, and the global nature of the downturn, which could prolong the crisis as poor countries struggle to combat the virus.
While the Great Depression started in the financial sector and played out over several years, Mr. Eichengreen notes that the drop in economic activity this year has been sudden and the bottom remains unclear. But some of the spillover effects could be similar, he said, with skittish households increasing their savings and businesses growing wary of large capital investments. And as deficits soar, some countries could push for austerity measures.While the Great Depression started in the financial sector and played out over several years, Mr. Eichengreen notes that the drop in economic activity this year has been sudden and the bottom remains unclear. But some of the spillover effects could be similar, he said, with skittish households increasing their savings and businesses growing wary of large capital investments. And as deficits soar, some countries could push for austerity measures.
“This is a different sort of Great Depression,” he said. “This is a different kind of shock and it’s playing out in different ways at a very different speed.”“This is a different sort of Great Depression,” he said. “This is a different kind of shock and it’s playing out in different ways at a very different speed.”
Governments around the world are grappling with how and when to reopen parts of their economies in hopes of reviving business activity. President Trump is expected to make an announcement this week that could provide guidance for scaling back stay-at-home orders.Governments around the world are grappling with how and when to reopen parts of their economies in hopes of reviving business activity. President Trump is expected to make an announcement this week that could provide guidance for scaling back stay-at-home orders.
But the economic recovery is expected to be slow until people are confident it’s safe.But the economic recovery is expected to be slow until people are confident it’s safe.
“Even if spending starts to bottom in April, we see little chance of a meaningful pickup in activity in the immediate future,” economists at J.P. Morgan wrote in an April 9 research note, noting that reopening could lead to relapse. “We don’t think that the bottom of the current downturn will occur until May at the earliest.”“Even if spending starts to bottom in April, we see little chance of a meaningful pickup in activity in the immediate future,” economists at J.P. Morgan wrote in an April 9 research note, noting that reopening could lead to relapse. “We don’t think that the bottom of the current downturn will occur until May at the earliest.”
Bank of America economists said in a research note that “the coronavirus will cause the deepest postwar recession in U.S. history,” predicting a 6 percent hit to growth for the full year.Bank of America economists said in a research note that “the coronavirus will cause the deepest postwar recession in U.S. history,” predicting a 6 percent hit to growth for the full year.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said a quick rebound was unlikely, particularly if people continued to worry about getting sick.Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said a quick rebound was unlikely, particularly if people continued to worry about getting sick.
“We know after the Great Depression people carried the scars of that experience with them for many, many years,” Mr. Kashkari said in an interview on the “Today” show on NBC. “I think the longer that this goes on, the more people who are affected by it, the longer that recovery is going to be.”
Updated June 22, 2020Updated June 22, 2020
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
“We know after the Great Depression people carried the scars of that experience with them for many, many years,” Mr. Kashkari said in an interview on the “Today” show on NBC. “I think the longer that this goes on, the more people who are affected by it, the longer that recovery is going to be.”
That view is not monolithic. Another Fed official suggested on Tuesday that the shutdown was costing $25 billion a day in lost output, and that blanket testing should be made available to get people back to work.That view is not monolithic. Another Fed official suggested on Tuesday that the shutdown was costing $25 billion a day in lost output, and that blanket testing should be made available to get people back to work.
“You really don’t want to go to the quarantine policy unless you have to,” James Bullard, president of the Federal Reserve Bank of St. Louis, said during a public event broadcast on Zoom. “The quarantine was maybe the right response initially, but we’re not initially anymore — so it’s not going to be the right response to come back with a global quarantine in the future,” and society shouldn’t “think in terms of rolling quarantines.”“You really don’t want to go to the quarantine policy unless you have to,” James Bullard, president of the Federal Reserve Bank of St. Louis, said during a public event broadcast on Zoom. “The quarantine was maybe the right response initially, but we’re not initially anymore — so it’s not going to be the right response to come back with a global quarantine in the future,” and society shouldn’t “think in terms of rolling quarantines.”
He compared making widespread tests available to providing common goods, like eggs or cups of coffee.He compared making widespread tests available to providing common goods, like eggs or cups of coffee.
“People say it can’t be done or we don’t have enough resources,” he said. “You really want to ramp that up at all costs and even if somebody gets rich off it or something, you still want to do it.”“People say it can’t be done or we don’t have enough resources,” he said. “You really want to ramp that up at all costs and even if somebody gets rich off it or something, you still want to do it.”
Considerable uncertainty remains as the health of the economy will be dictated by the trajectory of the virus. If the pandemic persists into the second half of the year, the global contraction could be twice as severe and the anticipated rebound in 2021 could fail to materialize if additional waves of the virus spread later in the year, according to the I.M.F. Over the next two years, the pandemic could shave $9 trillion from global gross domestic product, or G.D.P.Considerable uncertainty remains as the health of the economy will be dictated by the trajectory of the virus. If the pandemic persists into the second half of the year, the global contraction could be twice as severe and the anticipated rebound in 2021 could fail to materialize if additional waves of the virus spread later in the year, according to the I.M.F. Over the next two years, the pandemic could shave $9 trillion from global gross domestic product, or G.D.P.
In 2020, the I.M.F. projects the euro-area economy will shrink by 7.5 percent, led by steep declines in Italy and Spain.In 2020, the I.M.F. projects the euro-area economy will shrink by 7.5 percent, led by steep declines in Italy and Spain.
Emerging markets and developing economies will not be spared, but in some cases they fare better. In China, where the virus originated and where draconian measures were imposed to combat it, the economy will expand at a sluggish 1.2 percent this year, down from 6.1 percent last year. India’s economy is expected to grow 1.9 percent, down from 4.2 percent in 2019.Emerging markets and developing economies will not be spared, but in some cases they fare better. In China, where the virus originated and where draconian measures were imposed to combat it, the economy will expand at a sluggish 1.2 percent this year, down from 6.1 percent last year. India’s economy is expected to grow 1.9 percent, down from 4.2 percent in 2019.
Tentatively, the fund projects global growth to rebound to 5.8 percent next year. Barring the fast discovery of a vaccine or treatment, most countries are not expected to return to their pre-virus growth trends in 2021.Tentatively, the fund projects global growth to rebound to 5.8 percent next year. Barring the fast discovery of a vaccine or treatment, most countries are not expected to return to their pre-virus growth trends in 2021.
The fund calls for governments to invest in supporting their health care systems and ensuring that workers maintain ties to their jobs during lockdowns so that economic activity can resume when the virus recedes. In a press briefing that was broadcast online, Ms. Gopinath urged countries not to turn to protectionism and retreat behind their borders, warning that following such instincts could slow the recovery.The fund calls for governments to invest in supporting their health care systems and ensuring that workers maintain ties to their jobs during lockdowns so that economic activity can resume when the virus recedes. In a press briefing that was broadcast online, Ms. Gopinath urged countries not to turn to protectionism and retreat behind their borders, warning that following such instincts could slow the recovery.
“It is very important that this does not become a feature where we reverse all the gains we have got from globalization,” she said.“It is very important that this does not become a feature where we reverse all the gains we have got from globalization,” she said.
Ana Swanson contributed reporting.Ana Swanson contributed reporting.