The coronavirus will trigger the worst global recession since the Great Depression; in MENA, only Egypt’s economy will grow this year –IMF
The coronavirus will trigger the worst global recession since the Great Depression, the IMF predicts: The world is facing its greatest economic crisis since the Great Depression as output plummets at a record pace in response to the “Great Lockdown” put in place to contain covid-19, the IMF warned yesterday.
The global economy will contract by 3% this year as the loss of output “dwarfs” that seen during the 2007-08 financial crisis, the lender said in its first World Economic Outlook since the onset of the pandemic. In the report published ahead of the IMF/World Bank Spring Meetings this weekend, IMF chief economist Gita Gopinath described the situation as “a crisis like no other,” and said that the outlook had changed “dramatically” since January, when the fund had forecast 3.3% growth this year.
Advanced economies will bear the brunt of the downturn: Growth in advanced economies will contract by a stunning 6.1% this year before recovering to 4.5% growth next year. Emerging economies will see a milder 1% contraction — with India and China both remaining in positive territory — before growth surges at a 6.6% clip in 2021.
A sharp recovery clouded by uncertainty: The IMF sees the global economy returning to growth in 2021 and expanding by 2.4% but warns that there is “extreme uncertainty” about the forecast, likening the situation to a “war or a political crisis” that is almost impossible to predict.
How does Egypt fare in all this?
GDP growth will slow, but Egypt will be the only country in the region to see its economy expand: The fund now projects GDP to grow at a 2% clip this year before accelerating slightly to 2.8% in 2021. The IMF’s projections for 2020 represent a 64% decline in growth compared to 2019, when the economy expanded by 5.6%. The government has left unchanged (for now) its expectations for 4.5% growth in the upcoming 2020-2021 fiscal year, saying in the draft of its upcoming budget earlier this week that it will revisit projections as the impact of covid-19 on the domestic economy becomes clear.
Inflation will remain under control: Annual price growth will continue to remain within the Central Bank of Egypt’s 9% (+/-3%) target range until the end of 2021. Inflation will average 5.9% in 2020 before creeping up to 8.2% through 2021, according to the lender’s estimates.
Current account deficit to widen: Egypt’s current account deficit is expected to widen further over the coming two years, reaching 4.3% of GDP in 2020 and 4.5% the year after. Egypt recorded a 3.6% deficit in 2019.
The unemployment rate is projected to rise from 8.6% last year to 10.3% in 2020 and 11.6% the year after.