IMF warned of historic economic recession

The IMF warns of a historic economic downturn since the Great Depression. The International Monetary Fund said in a blog report that the economy will slow by 3% in 2020. This represents a drastic change in your forecasts in the latest report on the global economic outlook, published in January. Against this background, the question arises whether Bitcoin could be an option in this situation.

All of this was caused by the spread of the coronavirus pandemic. This has not only resulted in thousands of deaths worldwide, but has also blocked and paralyzed economic activity.

Mainly due to the obligation to respect the social isolation of different countries, use the quarantine as a necessary measure to avoid a little more infection.

Many countries are now facing multiple crises. Especially in the areas of health, finance and collapse in raw material prices, which work together in a complex way.

Gita Gopinath, director of the research department at the IMF, said in a post on the institution’s blog that after the global shutdown in response to the coronavirus “The extent and speed of the breakdown of economic activity are different from anything we’ve experienced in our lives.”

Global GDP decline, according to the IMF

In the event that they peak in most countries due to the pandemic in the second quarter and fall in the second half of the year, the IMF expects the global economy to decline -3% worldwide in April.

After the IMF warned of a historic economic downturn, it would be the largest the world has seen since World War II (1939-1945). As well as the biggest economic crisis since the Great Depression that started in 1929.

The intensity of the crisis will be much greater than when the global economy was cut in 2009. Due to the financial crisis that was triggered in 2008 by the bankruptcy of Lehman Brothers, the IMF points this out.

The advanced economies of Europe and North America will bear the brunt with a fall in national GDP of over 6% in all cases this year.

Italy will lead the global collapse: with a decline in national wealth of -9.1%, followed by Spain (-8%), France (-7.2%), Germany (-7%) and the United Kingdom (- 6%) 5%), Canada (-6.2%) and the United States (-5.9%).

In the meantime, the major emerging economies, mainly Asia, will be less affected, with an average decline in GDP in their area of ​​-1% in 2020.

Indeed, China and India’s prosperity will see positive growth of 1.2% and 1.9% this year, according to IMF estimates.

GDP recovery by 2021

Gopinath said there is room for optimism for next year.

Assuming that COVID-19 is watered down and that the global policies in place to prevent widespread corporate bankruptcies, prolonged job losses and financial tensions are effective across the system.

“We forecast a recovery of 5.8% in 2021.”Said Gopinath.

However, this recovery in 2021 is only partial. The level of economic activity is expected to remain below the level they had forecast for the year before the virus arrived.

The cumulative losses in global GDP in 2020 and 2021 due to the pandemic crisis could be around $ 9 trillion. A higher number than the economies of Japan and Germany combined. This is what the IMF report points out.

Is bitcoin an option?

With Bitcoin not correlating so much with traditional markets, it could be an alternative to address the recession this year. With halving on the agenda for next month, traders would also take more positions in Bitcoin.

As the first major global crisis Bitcoin is facing, there is no story about how the major cryptocurrency might react. However, the conditions could be created for price developments to be optimistic again.