Government efforts to contain the coronavirus pandemic have plunged rich and poor countries alike into an economic disaster not seen since the Great Depression, according to the International Monetary Fund.
“This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis,” IMF economic counselor Gita Gopinath wrote in the revised World Economic Outlook.
That analysis projects a “cumulative loss” of roughly $9 trillion around the world, as billions of people have adopted social distancing practices to stop the contagion’s spread. The IMF projection assumes that “the pandemic fades in the second half of 2020,” but there’s no guarantee that the crisis will be so short-lived.
“The pandemic could prove more persistent than assumed in the baseline,” the IMF analysis acknowledges. “Moreover, the effects of the health crisis on economic activity and financial markets could turn out to be stronger and longer lasting, testing the limits of central banks to backstop the financial system and further raising the fiscal burden of the shock.”
Still, the IMF endorsed “the Great Lockdown” social distancing measures as a prudent tactic for both public and economic health.
“Flattening the spread of COVID-19 using lockdowns allows health systems to cope with the disease, which then permits a resumption of economic activity,” Gopinath said. “In this sense, there is no trade-off between saving lives and saving livelihoods.”
The economic damage caused by the social distancing tactics has spurred a debate within the United States about when the lockdowns should end. “I want to get it open as soon as possible,” President Trump said last week. “This country was meant to be open and vibrant and great, not where people are, you know, staying in.”
“While COVID-19 accelerates very fast, it decelerates much more slowly,” World Health Organization Director-General Tedros Adhanom Ghebreyesus said Monday. “That means control measures must be lifted slowly and with control.”
American officials worry that the economic damage inflicted by the coronavirus pandemic will be so severe that China, which has emerged as a strategic rival for the U.S., will be in a position to take advantage of Western nations in ways that have long-term national security consequences.
“There are some hopeful signs that this health crisis will end,” Gopinath wrote. “Countries are succeeding in containing the virus using social-distancing practices, testing, and contact tracing, at least for now, and treatments and vaccines may develop sooner than expected.”
