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Governments will never know how many lives they have saved by prompting the Great Lockdown, which will shortly tip the world into the biggest economic contraction since the Great Depression. But we should all hope it’s a lot.
On the most optimistic scenario the global economy will shrink 30 times more than it did during the global financial crisis, causing about $US9 trillion in income to evaporate over the next few months.
The International Monetary Fund’s latest economic outlook catalogues a high-speed economic train crash that will see unemployment, debt and bankruptcies soar more suddenly than ever before.
Governments are powerful and they have never before acted to shut down their economies, borrow and spend on this scale. They will collectively spend an extra $US3.3 trillion to prop up output, which is nevertheless expected to shrink 6.1 per cent in 2020 across advanced nations, including 9.1 per cent in Italy — the worst affected.
They will extend and guarantee loans for a further $US4.5 trillion, much of which will probably never be repaid, the IMF also estimated. Public and private debt, almost $US290 trillion ahead of the crisis, will soar once again. Advanced nations’ average debt will surge to the equivalent of 122 per cent of GDP, up from 105 per cent now.
[img]https://cdn.newsapi.com.au/image/v1/911df10c6262c11d499729e17cf3ba61?width=650[/img]A NSW police officer asks people to move on while patrolling Sydney’s Bondi Beach over the Easter long weekend. Picture: AAP
No one can accuse the government of not doing enough to offset the effects of the shutdown. The spending and revenue measures amount to 10.6 per cent of GDP on the IMF’s reckoning, far more than any other developing or developed nation has proposed — double Canada’s, more than triple Britain’s.
This article first appeared on www.theaustralian.com.au
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