The impact of the Covid-19 pandemic on the global economy this year is not as bad as initially thought. International institutions are busy revising the global economic projections better, although they are still contracting. However, economic recovery to pre-pandemic levels has yet to go through a long climb and is prone to falls.
In the October edition of the World Economic Outlook report released by the IMF on Tuesday (14/10). The projection for the global economy this year is negative 4.4%, better than June’s prediction of minus 5.2%. However, it is estimated that the world economy will grow at a slower pace than the previous prediction, which grew by 5.4% to 5.2%.
IMF Chief Economist Gita Gopinath explained that this year’s economic projection is better than the initial prediction because the condition in the second quarter was not as bad as predicted and signs of economic recovery in the third quarter.
However, this year’s economic recession is the deepest since the Great US depression which lasted for 10 years since 1929. “This is the worst crisis since the US major depression, requiring policy innovation at the national and international levels to get out of the disaster,” said Gopinath on his website.
IMF official. Gopinath explained that the economies of most developed and developing countries will be below the 2019 level, even next year. However, the exception applies to the Chinese economy, which is projected to still record growth this year of 1.9%. China’s economy is predicted to grow to 8.2% next year.
“Countries that rely more on economies with human contact and petroleum exports will face a weaker recovery than those that are manufacturing-led,” he said.
The Impact Of Covid-19 Pandemic On the Number Of Jobs
The crisis, according to Gopinath, is likely to leave scars in the medium term as the labor market needs time to recover, investments are held back by uncertainty and balance of payments problems. The International Labor Organization (ILO) record, the Covid-19 pandemic caused a massive reduction in working hours equivalent to 400 million full-time jobs in the second quarter of 2020, higher than the first quarter which was equivalent to 115 million working hours.
Women workers who work in the informal sector are most affected. Although there have been improvements in employment data since May in line with the economic recovery, the IMF estimates that the potential for community income lost due to the pandemic will increase.
Referring to the potential increase in income before the pandemic, the potential for lost money income could reach US $ 28 trillion during 2020-2025, greater than the previous projection of US $ 11 trillion which only occurred in 2020-2021. “This creates a severe setback for increasing the average standard of living data across all groups of countries,” he said.
This projection cannot be separated from the IMF’s prediction regarding the global economy which will grow at around 3.5% in the medium term after 2021. The agency also predicts that the economic gap between developed and developing countries will be even greater. “90 million people may fall into extreme poverty,” he said.
Corrections of economic predictions this year were also conveyed by the Organization for Economic Cooperation and Development or the OECD. The Paris-based institution projects that the economy in 2020 will contract by 4.5%. better than the previous projection of 6%. Unlike the IMF, which cut its growth projection for next year, the OECD actually raised its projection from a growth of 4.8% in June to 5%.
However, the OECD assesses that the economies of most countries in 2021 will remain below the 2019 level. In fact, the realization is potentially lower than projected before the pandemic. In addition, growth projections are made based on the assumption that the Covid-19 pandemic ends and consumer confidence increases next year.
Meanwhile, if the pandemic continues to spread causing a tighter lockdown, the world economy may contract by 3% in 2021 and push the unemployment rate even further.