The global economy is expected to suffer a deeper contraction this year than previously thought, as the pandemic and lockdowns devastated markets before it recovers in 2021. This is according to the International Monetary Fund’s World Economic Outlook that projects the world’s real output will contract by 4.9% by the end of this year, making this the worst recession since the Great Depression and more severe than during the 2008/2009 global financial crises.
These dismal figures are significantly more agonising than the IMF’s previous projection made in April as economies around the world are still underpinned by a high degree of uncertainty about the Covid-19 pandemic coupled with caution about more waves of infection, a possibility of more lockdowns and slow progress in the development and production of a vaccine.
“The Chinese economy was the only economy that recorded a positive GDP growth rate during the quarter under review, having already experienced its sharp contraction in the first quarter of 2020. The positive growth was mainly driven by the easing of lockdown restrictions and government stimulus measures adopted to bolster its economy,” Bank of Namibia states in its latest Quarterly Bulletin.
Meanwhile, on the domestic front, the Bulletin shows that slower economic activities during the second quarter of this year were particularly reflected in the tourism, transport, manufacturing, wholesale and retail trade, construction, and mining sectors and were of course mainly attributed to the pandemic and its effects.
“The very weak activity was reflected in the collapse in passenger arrivals in the tourism sector and lower cargo volumes in the transport sector. Moreover, lower output was registered in the manufacturing sector, while real turnover in the wholesale and retail trade sector also declined. The construction sector activity also slowed due to the negative impact of the Covid-19 pandemic,” reads the bulletin.
In the same vein, activity declined in the agriculture sector as livestock marketing became stagnant because farmers were restocking.
The Bulletin further states that growth in money supply (M2) rose while growth in credit extended to the private sector slowed during the second quarter of this year.
“Year-on-year growth in M2 rose to 14.7% at the end of the second quarter, from 7.3% at the end of the same quarter in 2019. The higher growth in M2 was underpinned by an increase in domestic claims of the depository corporations, specifically net claims on central government. However, growth in credit extended to the private sector slowed due to a slackening in demand for credit, particularly by the corporate sector, consistent with the sluggish growth within the domestic economy”.
The central bank pointed out that the pandemic wreaked havoc on the global economy in Q2 as growth suffered a severe contraction driven by the virus and its associated lockdown
measures.