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IMF predicts worse recession since Great Depression

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The economic impact of the COVID-19 pandemic is predicted to result in the “worst recession since the Great Depression”, but Treasurer Josh Frydenberg is confident Australia will rebound faster than most other countries.

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The International Monetary Fund, in its 2020 World Economic Outlook released overnight, forecasts the global economy to fall three per cent in 2020 because of the coronavirus crisis – compared with a fall of 0.1 per cent in 2009 at the height of the global financial crisis.

It is predicting a partial rebound in 2021, with the world economy growing at a 5.8 per cent rate, but said its forecasts were marked by “extreme uncertainty”.

“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” the IMF said in its report.

“The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”

The IMF expects the Australian economy to contract by 6.7 per cent this year, more than double the fall for the global economy, before rebounding in 2021.

The IMF’s forecast of 6.1 per cent growth in the Australian economy in 2021 would still leave it in negative growth for the first time since 2019.

Frydenberg said the rebound in growth is faster than the IMF is forecasting for the economies of the United States, Canada, Japan, France, Germany and the United Kingdom.

“The Morrison government has taken decisive action to protect Australians and the economy from the effects of the coronavirus, with government support for the economy totalling $320 billion or 16.4 per cent of GDP,” Frydenberg said in a statement on Wednesday

The dire economic outlook comes as several countries, including Spain, start easing restrictions to try to revive the economy.

The spread of the virus in Australia has slowed and health authorities say the pandemic is moving into a containment phase.

Some 6400 Australians have so far caught COVID-19 and more than half of them have recovered, while 62 people have died. Worldwide, there have been more than 125,000 deaths.

The national cabinet of state and federal leaders will meet on Thursday to discuss when restrictions on travel and gatherings of people can be relaxed.

But Prime Minister Scott Morrison has cautioned that Australia is “not in that phase yet”.

“We’re many weeks away from being in a place like that,” Morrison told Seven’s Sunrise on Tuesday.

But Morrison on Wednesday sent a message to Australia’s teachers, urging them to get back into the classroom – especially for the students who cannot be homeschooled.

“They need you as our great teachers more than ever. We cannot allow a situation where parents are forced to choose between putting food on the table through their employment, to support their kids and their kids’ education,” he said in a social media message.

“And I know teachers don’t want to force those choices on the parents either, because if we do, of course, thousands of jobs would be lost, livelihoods forsaken.”

Term Two starts in Victoria on Wednesday with most children learning remotely.

Meanwhile, thousands more Australians will be checked for the coronavirus as various states and territories expand their testing regimes to ensure more people showing symptoms can be screened for the disease.

Authorities want to keep a close eye on possible community transmissions, where new diagnoses aren’t linked to known cases or people who have brought the virus back from overseas.

-AAP

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