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IMF: Deepest recession since the 1930s, shrinkage of 7.5 percent for the Netherlands NOW

The global economy is likely to face the biggest economic crisis since the 1930s, economists at the International Monetary Fund (IMF) write on Tuesday. The UN organization expects the world economy to shrink by 3 percent in 2020, followed by a year of recovery in 2021. The Dutch economy will also be hit hard by the virus: the IMF predicts a shrinkage of 7.5 percent.

The global economy is affected by measures taken to contain the coronavirus. Due to travel restrictions, (partial) lockdowns and social distancing economic activity has collapsed.

The UN organization has therefore renamed the economic crisis The Great Lockdown. “We have never experienced the magnitude and pace of activity collapse in our lives,” writes IMF chief economist Gita Gopinath.

And so the IMF has had to cut its economic growth forecast by a whopping 6.3 percentage points from January this year: from a growth of 3.3 percent, to a contraction of 3 percent from last year.

The Dutch economy will even shrink by 7.5 percent, the IMF expects. This makes the estimate more pessimistic than the most extreme scenario of the Central Planning Bureau (CPB). At worst, CPB assumes a contraction of 7.2 percent.

Next year recovery of 5.8 percent

The IMF expects the world economy to see some recovery again in the second half of 2020, assuming that coronavirus infections are decreasing, economic aid packages are keeping bankruptcies at bay and unemployment is not expected to rise too far.

The global economy will then recover in 2021 with growth of 5.8 percent. Growth for next year is higher than previously thought, because growth will be lower in 2020.

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