The coronavirus pandemic will trigger the worst economic fallout since the Great Depression of the 1930s, the International Monetary Fund has warned.
"The bleak outlook applies to advanced and developing economies alike. This crisis knows no boundaries. Everybody hurts," IMF Managing Director Kristalina Georgieva said on Thursday, warning that 2020 will be "exceptionally difficult".
Georgieva stated that the IMF estimates a partial recovery of the economy in 2021, should the pandemic fade in the latter part of the year allowing for restrictions to gradually lift with a reopening of the economy.
However, she said that there is "tremendous uncertainty around the outlook," adding that it "could get worse depending on many variable factors, including the duration of the pandemic".
With half of humanity under lockdown, factories empty of workers, non-essential stores shut and shoppers confined to their homes, it was obvious that the economic toll of the coronavirus pandemic would be massive.
And already the eurozone's two biggest economies are showing just how ugly things are getting, as they register their steepest declines in decades.
Germany, traditionally Europe's growth engine, faces a severe recession and will see its economy shrink by almost 10 percent in the second quarter, according to the country’s top economic research institutes.
"This is the largest decline in Germany since the start of our quarterly measures in 1970, and twice as large as during the financial crisis in the first quarter of 2009," said Timo Wollmershäuser, senior economist at the IFO Institute in Munich.
In France, the eurozone’s second biggest economy, the central bank said on Wednesday the country had entered recession with an estimated 6 percent drop in GDP in the first quarter of this year – the biggest decline since the Second World War.
Things could get even worse, as every fortnight of lockdown is knocking at least 1.5 percentage points off economic growth, the Banque de France warned.
"I do not think I have ever hidden from the French people that this economic crisis can only be compared to the 1929 crisis in terms of its severity, its global nature and its duration," said France’s economy and finance minister Bruno Le Maire.
Economies and families under strain
The International Labour Organization said this week that 1.25 billion people were at risk of drastic pay cuts and layoffs due to the pandemic and related lockdowns.
Meanwhile, the United Nations and Oxfam warn that half a billion more people worldwide could be pushed into poverty, and the scale of the crisis in Italy has sparked fears that mafias could take advantage of the situation.
These grim predictions are all putting extra pressure on governments struggling to assess when they should start lifting their confinement measures, and how much money they should throw at their economies to cushion the blow.
The European Commission has encouraged EU countries to do everything they can to protect both their populations and their economies in the face of the pandemic.
After marathon talks this week, eurozone finance ministers agreed late on Thursday on an emergency package worth more than €500 billion to mitigate the economic fallout. But the deal did not include issuing joint debt, or so-called "corona bonds", to finance the recovery.
Historic drop in trade
The coronavirus pandemic is also causing a massive drop in global trade volumes, expected somewhere between 13 and 32 percent this year, according to the World Trade Organization. That would be a much faster contraction than the 12 percent decline seen in 2009.
However, the WTO’s director-general believes a quick and strong recovery is still possible.
"If the pandemic is brought under control relatively soon and the right policies are in place, trade and the output can rebound nearly to their pre-pandemic trajectory as early as 2021, so next year," said Roberto Azevêdo.