Global economy faces a huge threat of ‘The Great Depression’, warns IMF

Washington: International Monetary Fund (IMF) warned that if corrective measures are not taken regarding the increasing disparity between the rich and poor, there is a looming threat of ‘The Great Depression revisiting the global economy, like the decades of 1920 and 1930. The chief of the IMF warned that credit policies of the countries can be used to avoid this crisis. But along with that, the policies in the financial sector will prove important and cannot be ignored. Otherwise, there is a possibility of a repeat of the situation in the 1920 decade.

A few days ago, IMF published the ‘World Economic Outlook’, for the year 2020. The report predicts that the growth rate of the global economy will be 3.3%. This rate was predicted to be 3.4% in a report published in October. The IMF explained that change had to be made to the rate, as all the emerging economies, including India, are showing a downward trend in the growth rate.

Kristalina Georgieva, the Managing Director of the IMF, pointed out that the global economy was once again headed for the Great Depression, like the 1920-30 decades. Chief of the IMF claimed that economic disparity, uncertainty and climate changes, will be the factors responsible for this. Kristalina Georgieva warned that extreme economic disparity could tie down development and can rock the foundation of a country.

She referred to the IMF reports in support of her claims. One of the reports points out that if the financial sector is not handled well, the disparity increases. The IMF chief said that this report is a warning and at the same time an appeal, for immediate remedial action. Kristalina Georgieva claimed that if the international community takes a unified action, mistakes made in the decade of 1920 can be avoided in 2020.

In the last six months, the IMF has pointed to the debt burdens on the developed, as well as, emerging economies, through its various reports. IMF had also warned that this burden is disproportionate and there is a threat of the global economy crumbling under the pressure of this burden. Before the IMF, economists Paul Krugman and Peter Schiff, as well as former British Prime Minister Gordon Brown, had warned of recession.

Nobel Laureate economist Paul Krugman had warned that the international community has not taken corrective measures regarding the various problems in the global economy and this will invite a recession in the world.

Economist and investor Peter Schiff had warned that the world has not learnt a lesson from the 2008 economic crisis. Therefore a bigger crisis is waiting in the wings, to strike and the failure of the US Dollar will make the situation more dangerous.

Whereas, former British Prime Minister Gordon Brown had warned in 2018 that there is a possibility of a recession, like the one seen a decade ago, returning to the global economy and the world is walking in its sleep towards a new economic crisis.

IMF Chief’s warning regarding the Great Depression has invoked a reaction from Russia and Russia claimed that it was ready for the recession.