Economic Crisis Unlike Anything Seen Before: IMF’s Gita Gopinath

IMF chief economist Gita Gopinath has said that the economic lockdown and economic crisis caused by Covid-19 is a truly global crisis.

"Past crises, as deep and severe as they were, remained confined to smaller segments of the world, from Latin America during the 1980s to Asia in the 1990s. Even the global financial crisis 10 years ago had more modest effects on global output.

For the first time since the Great Depression, both advanced and emerging market economies will be in recession in 2020. The forthcoming June World Economic Outlook Update is likely to show negative growth rates even worse than previously estimated. This crisis will have devastating consequences for the world's poor," Gita Gopinath said in a blog.

According to her, aside from its unprecedented scale, the Global Lockdown is playing out in ways that are very different from past crises.

"These unusual characteristics are emerging all over the world, irrespective of the size, geographic region, or production structure of economies. This crisis has dealt a uniquely large blow to the services sector.

In typical crises, the brunt is borne by manufacturing, reflecting a decline in investment, while the effect on services is generally muted as consumption demand is less affected. This time is different. In the peak months of the lockdown the contraction in services has been even larger than in manufacturing, and it is seen in advanced and emerging market economies alike.

There are exceptions-like Sweden and Taiwan Province of China, which adopted a different approach to the health crisis, with limited government containment measures and a consequently proportionately smaller hit to services vis-à-vis manufacturing, " she said in her blog.