IMF: Global economy set to shrink by 3% this year

The global economy is expected to shrink by 3 per cent this year amid a coronavirus-driven collapse that would mark the steepest downturn since the Great Depression in the 1930s, the International Monetary Fund (IMF) said yesterday.

But if the virus is contained and economies can begin operating again, next year should see a rebound of 5.8 per cent, according to its World Economic Outlook out yesterday. The IMF noted that its forecasts were marked by extreme uncertainty and outcomes could be far worse, depending on how the pandemic develops.

"This crisis is like no other," said its chief economist Gita Gopinath.

Singapore's real gross domestic product (GDP) this year is projected by the IMF to come in at minus 3.5 per cent. The Trade and Industry Ministry had earlier estimated a full-year GDP growth forecast of minus 4 per cent to minus 1 per cent. But Singapore could bounce back next year with 3 per cent growth, said the IMF.

Deputy Prime Minister Heng Swee Keat noted that a global contraction of minus 3 per cent will be "much worse" than the 2008-2009 financial crisis. He agreed with the IMF that "effective policies are necessary to forestall worse outcomes", noting that almost $60 billion has been committed on the fiscal front to stabilise the economy and to preserve jobs.

"We have braced ourselves," he wrote in a Facebook post last night.

"As the IMF emphasises, there is considerable uncertainty - so we hope for the best, and begin to prepare to emerge from this crisis.

"But at the same time, we must be prepared for even rougher seas."