IMF: the Worst Recession Ever Expected in 2021

While world governments are confident that the economy will recover in 2021, the latest estimations of the International Monetary Fund show that the global economy will shrink by 4.4% in 2020.

“No country will escape unscathed. It will be the worst recession ever.”

Gita Gopinath, chief economist of the IMF

Given that the limitations imposed on the economy and public life will be prolonged, the World Bank estimates the following economic declines: 

• 9.1% for the Eurozone
• 7% for industrialized countries
• 2.5% for emerging countries

Surprisingly, in China, the country where Covid-19 appeared, the economy is expected to grow by 1%.

Gita Gopinath states that in 2021 an increase of 5.4% is expected, as compared to 2020, but only if there would not be a third wave of the pandemic with SarsCov-2.

While in Germany the public debt, related to the economic performance, will exceed in 2020 the maximum level registered at the end of the Second World War, the Romanian officials rejected a future agreement with the Monetary Investment Fund. Yet, there are voices who ask for an IMF deal or at least suspect a deal after the Romanian elections.

Romania registered in the Q2 of this year a shrinkage of the economy of 12.3% compared to the Q1 and Q3 2020/2019 indicate a decline of 6%, second only to Spain who registered an even bigger decline, of 8.7%. Meanwhile, the average decline of the European Union countries was 4.3%, according to Eurostat. It is the biggest shrinkage of the economy in the last 24 years for Romania. However, the Romanian Minister of Finance is confident that the country can avoid the recession.

Romania’s public debt was already 450 billion lei in August this year, reaching over 42% of GDP and in October it reached even more, around 47%. The budgetary deficit is expected to exceed 9.1% at the end of the year.

In this context, even if Romania’s economy is expected to increase in 2021, the level of the unemployment is expected to raise up to 7%, an unprecedented figure since the country joined the EU. Hard times are expected and the evolution of the Romanian economy depends on the evolution of the European economy, but mostly on the evolution of the pandemic in 2021.