A New Chapter of History: the Great Lockdown
The magnitude and speed of collapse in business activity that followed the governments’ measures to contain COVID-19 is unlike anything experienced in our lifetimes.
In its latest edition of World Economic Outlook published on 14th April, the IMF drew parallel between the Great Lockdown of present times and the Great Depression of the 1930’s.
The basic assumption made by IMF was 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 this case,
the April World Economic Outlook projects global growth in 2020 to fall to -3 percent, which is a downgrade of 6.3 percentage points from January 2020. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.
– Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent – Gita Gopinath, the IMF’s economic counsellor added.
For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession, which makes the Great Lockdown truly a global crisis.
This is not the worst case scenario
Given the extreme uncertainty around the duration and intensity of the health crisis, the IMF also introduced some alternative, more adverse scenarios.
The pandemic may not recede in the second half of this year, leading to longer durations of containment, worsening financial conditions, and further breakdowns of global supply chains. In such cases,
global GDP would fall even further: an additional 3 percent in 2020 if the pandemic is more protracted this year, while, if the pandemic continues into 2021, it may fall next year by an additional 8 percent compared to the baseline scenario.
Forecast for Hungary
While the best scenario projects -6.6% growth in GDP for Europe, the same index is expected to be -5.2 for emerging and developing Europe.
With the -3.1% projected for Hungary, the country stands out in the region with Serbia being the only one preceding with “only” 3% fallback.
In comparison with other analysists, this forecast can be still considered optimistic. E.g. Kopint-Tárki Insitute for Economic Research Co. projected 5.5% fallback for Hungary in 2020 in case the lockdown restrictions can be eased before the end of summer.