DUBAI: The global economy is facing its worst crisis since the Great Depression of the 1930s, the International Monetary Fund warned on Tuesday.

The COVID-19 pandemic has halted economic activity across great swaths of the world, and economies are expected to shrink by 3 percent this year. “This crisis is like no other,” said IMF economic counselor Gita Gopinath.

“It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the financial crisis a decade ago. The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”

Growth may pick up next year and could reach 5.8 percent if the pandemic fades in the second half of 2020 and economic life approaches normal, but the IMF was wary of any premature forecast of recovery. “There remains considerable uncertainty around the forecast, the pandemic itself, its macroeconomic fallout, and the associated stresses in financial and commodity markets. Much worse growth outcomes are possible and maybe even likely,” it said.

However, financial markets seem to be taking the gathering storm in their stride. The S&P 500 index, the main pulse of Wall Street health, rose 2.5 percent the day the IMF report was published.

Some experts believe a positive run in global stock markets means the worst of the financial effects of the pandemic are over. Goldman Sachs, one of the biggest banks in the world, said it did not foresee further falls in shares after the $2 trillion stimulus from the US government, despite rising death tolls from the disease.

Others disagreed. Tarek Fadlallah, chief executive of the Middle East asset management business of Japanese bank Nomura, told Arab News: “The caution projected by economists and medical professionals stands in stark contrast to a rush back into the market by investors fearful of missing out on discounted stock prices.”

The biggest projected fall by the IMF came in virus-ravaged Italy, with a 9.1 percent decline projected. The US was forecast to be down 5.9 percent this year, with China 1.2 percent ahead — still its lowest growth rate for several decades.

The Middle East and Central Asia projection was a 2.8 percent decline, with Saudi Arabia expected to fall 2.3 per cent. The IMF’s detailed report on the region will be released on Wednesday.

On global oil markets, Brent crude fell 6.8 per cent to below $30, despite the historic OPEC+ deal this week to cut output.

The IMF said governments should implement policies to support their domestic households and businesses through the worst of the crisis. It also announced plans to suspend debt repayments for 25 of the world’s poorest countries.