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'This makes the Great Lockdown the worst recession since the Great Depression' - IMF expects Irish economy to shrink by 6.8pc

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Shuttered: Streets such as Dublin’s Grafton St have been left deserted following the Covid-19 lockdown. Photo: Douglas O’Connor

Shuttered: Streets such as Dublin’s Grafton St have been left deserted following the Covid-19 lockdown. Photo: Douglas O’Connor

Shuttered: Streets such as Dublin’s Grafton St have been left deserted following the Covid-19 lockdown. Photo: Douglas O’Connor

The economy is expected to contract by 6.8pc this year due to the impact of the coronavirus, according to new forecasts from the International Monetary Fund (IMF).

The Fund released its updated World Economic Outlook today and forecast that the global economy would contract by 3pc this year.

“This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period," Chief Economist Gita Gopinath said in the report.

"This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.

“The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars (€8.2 trillion), greater than the economies of Japan and Germany, combined,” Ms Gopinath said.

Overall, the Euro area economy is expected to shrink by 7.5pc as a result of the pandemic, the IMF said, with Greece suffering the biggest decline at 10pc and heavily indebted Italy seeing a drop of 9.1pc.

The IMF said it expected the Irish economy to grow by 6.3pc next year and the Eurozone by 4.7pc as a recovery kicked in.

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Gita Gopinath

Gita Gopinath

Bloomberg

Gita Gopinath

The IMF’s forecasts are less pessimistic than those of the Central Bank of Ireland.

“While the economy is shut down, policymakers will need to ensure that people are able to meet their needs and that businesses can pick up once the acute phases of the pandemic pass,” the Fund said.

“This requires substantial targeted fiscal, monetary, and financial measures to maintain the economic ties between workers and firms and lenders and borrowers, keeping intact the economic and financial infrastructure of society,” it said.

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