Canada’s economy is facing unprecedented losses due to the COVID-19 pandemic, as the global economy faces a crisis worse than the 2008 financial recession and will eventually lead to the “worst recession since the Great Depression.”
According to the latest report by the International Monetary Fund (IMF), the world’s economy will shrink by 3% in 2020 with Canada’s shrinking more than double at 6.2%.
Canada’s rate is slightly higher than the average of advanced economies at 6.1%. The countries included are the US, Germany, France, Italy, Spain, Japan, and the UK.
“There remains considerable uncertainty around the forecast, the pandemic itself, its macroeconomic fallout, and the associated stresses in financial and commodity markets,” reads the report.
“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 Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”
The IMF predicts that worldwide trade will plummet 11% this year and then grow 8.4% in 2021.
It states that a partial recovery is projected for 2021, “with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound.”
“The COVID-19 pandemic is inflicting high and rising human costs worldwide,” the report said.
“Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity.”
In the report, the IMF notes that if economic closures and measures gradually lessen, Canada’s economy is projected to grow by 4.2% in 2021 as economic activity normalizes helped by policy support — the world will see 5.8% growth, with advanced economies seeing 4.5%.
To compare, in 2019, Canada saw its economy grow by 1.6%, slightly below the advanced economy average of 1.7% — the world’s economy increased by 2.9%.
“The COVID-19 pandemic is a human and health crisis that poses major risks for the world economy. Coordinated global action is crucial to overcoming the challenges ahead of us,” Minister of Finance Bill Morneau said.
“Participating in international discussions at the G7, G20, and the IMF is an important way to contribute to supporting global economic stability, including in vulnerable countries that are likely to face severe impacts. By working together, we can confront the challenges we are facing globally and lay the foundations of the eventual recovery.”
According to the IMF, policymakers will need to implement substantial targeted fiscal, monetary, and financial market measures to support affected households and businesses.
By doing so, these actions will help maintain economic relationships throughout the shutdown and are essential to enable activity to gradually normalize once the pandemic is over and containment measures are lifted.
The IMF is calling on countries to co-operate in order to reduce the impact of the pandemic.