Forecasting global economic growth is a bit like staring at clouds to see what images they conjure—you are not quite making things up from scratch, but you have to fill in a lot of the blanks yourself. 

Even though global forecasts have to make sense of an enormous number of moving parts based on often unreliable sources of data, they nonetheless provide a decent sense of the general direction in which the global economy is headed.

The latest World Economic Outlook from the International Monetary Fund (IMF) is a case in point. The IMF projects that the global economy will shrink by 3.0 per cent this year. Only a few months ago, the IMF’s forecast called for GDP to expand by 3.3 per cent.

Even if the new IMF forecast ends up being off by a fair bit, it points to a dramatic reversal of fortune for our world. 

According to the report, “[i]t is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago.”

This is bad news for a lot of reasons, but it will be particularly hard on the world’s poorest people.

On the bright side, “[a]ssuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 per cent.”

That 5.8 per cent spike next year, however, is not enough for the global economy to catch-up to where it was headed before COVID-19. “The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion [U.S.] dollars, greater than the economies of Japan and Germany, combined.

The report forecasts that Canada’s GDP will shrink this year by 6.2 per cent while the U.S. economy contracts by 5.9 per cent. Whatever the final numbers turn out to be, the direction is down and the slope is steep. And because Alberta is facing the negative effects of both the pandemic and the oil price crash, our economy will likely be hit even harder, and take longer to recover, than the Canadian economy as a whole.

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A note on COVID-19: The COVID-19 pandemic is having a major impact on the economy here in Alberta and around the world. The Owl will report on these impacts when good information is available while continuing to track regularly scheduled releases of economic data and long-term trends.

For additional information on COVID-19 and advice for the public, please visit Alberta Health Services. Please go to atb.com for COVID-19-related updates from ATB Financial.