According to April estimates of the International Monetary Fund (IMF), the global economy is likely to achieve negative growth of -3% if the baseline scenario is achieved. This scenario is supposed to begin during signs of abatement in the Coronavirus pandemic during the remainder of the second quarter of the year. Then its containment begins during the second half of this year. IMF acknowledges the widening of the area of the unknown, i.e. the uncertainty, while prospects for failure to contain the pandemic will persist. If this happens, the global economy may lose twice the baseline estimates. Nevertheless, the report contains some optimism as the baseline scenario is likely to be achieved, the economy is expected to regain its strength and achieve positive growth by 5.8% in 2021, which we support its forecasts.
The harshest damage will hit the advanced economies which are expected to score negative growth by -6.1% in 2020, i.e. more than twice the global economy’s losses, and to achieve positive growth in 2021 by 4.5%. The Euro Zone will suffer the biggest losses by -7.5%, with Italy having the biggest losses by -9.1%, then Spain by -8.0%, France by -7.2% and Germany by -7.0%. These countries are the most affected by the pandemic.
Emerging and developing markets economies are expected to face much lighter blow and are estimated to lose about -1% in 2020 and to regain strong growth in 2021 by 6.6%. Both China and India within them will maintain a weak but positive growth rate in 2020 at 1.2% for China and 1.9% for India, and a strong return for the Chinese economic growth at 9.2% and India at 7.4% in 2021, which is good news for oil-exporting countries if it occurs.
The Middle East and Central Asia region is a region of weak growth and its economy is expected to lose about -2.8% in 2020, compensating that lose by a higher growth in 2021 by 4.0%. The Saudi economy will lose -2.3% in 2020 but will resume its positive growth by 2.9% in 2021, and Saudi Arabia is a model for other GCC countries.
The above is not the import part as it is merely a documentation of a periodic report in an exceptional global situation whose confrontation has no financial or monetary authorities, apart from being supportive, as leadership now is for scientists of a different class. What is important is that what happened revealed the misery of domestic economic policies and the crisis expedited the disclosure of that misery but it did not create it. Public administrations in Kuwait have volumes of warnings from previous eras of reaching this situation and instead of avoiding it, they contributed to its near occurrence. The Corona pandemic may give one last chance to begin a true economic reform, the cost of reform is quite high but its opportunity has not yet been lost.