IMF alerted that the looming Corona Virus recession will be at least as bad as the global financial crisis of all the times

The origins of 2008 and 2020 crises are different indeed but the thump to the economy is no different.

Take the Quick Recap of the Case

  • The 2008 crash was the termed as the “greatest jolt” to the global financial system as it pushed the world’s banking system at the verge of collapse. 
  • It all started when the housing market started creating an asset bubble in 2006. The financial institution started bundling the bad loans with the good ones and sold them as mortgage-backed securities. 
  • These mortgages were transformed into ever riskier investment. Moreover, the congress bailed out “too big to fail” banks using TRAP, by then, every system of it dived deep into the neck-deep quagmire from which quick reversal was absolute impossible. 
  • And within a few weeks after that, Lehman Brothers, one of the world’s biggest financial institutions, went bankrupt and £90bn was wiped off the value of Britain’s biggest companies in a single day resulting in downfall of the world economy.

The Case of 2020

At variance to the underlying financial glitch of 2008, the cause of 2020 crisis is more like a natural catastrophe. IMF alerted that the looming coronavirus recession will be at least as bad as the global financial crisis of all the times. Although the consequences conceivably appear the same but the differences are quite evident.

  • The Great Recession of 2008 was systemic and part of structural fault; it first took hold in the financial system whereas, the Great Pandemic of 2020 is a cyclical crisis which occurred due to the unprecedent outbreak of COVID- 19 to which the whole economy, despite of thoughtful planning and strategies, has surrendered itself to the situation.
  • In the recession of 2008, due to financial glitch in the economy, the market first faced the attack on the demand whereas, in the current scenario, it is vandalizing both supply and the demand of the economy chiefly due to the drastic hit in global supply chain. 

According to the International Monetary Fund’s latest forecasts, the global GDP could plummet 3 percent in 2020, compared to a 0.1% fall-off in 2008.

Let’s Now Talk Statistics to Understand the Impact of It

  • The crash of stock market in 2008 led to massive unemployment of 2.6 million jobs. The impact alone in Chinese market was severe that it fell nearly 70%. The global banking system eventually become short of funds, leading to a decline in bank lending that further hampered the confidence of people on financial institution. Due to which government faced enormous debt and this ushered in the period of ‘austerity’ with many governments specially in Europe seeking to cut spending.
  • The crunch of 2020 is not hidden to any part of the world, taking India for an instance, the NIFTY and SENSEX fell over 6%, the mid cap which grew consistently in the past 2 years, saw significant drop of 7% in the second week of March, 2020. The exports alone in February declined for at least $1 billion. According to the World Travel and Tourism Council, the outbreak has cut down 50 million jobs worldwide that account for 10% decline in global GDP.

In the former case, we can see China struggling even to survive in the economy but now the coin is flipped, for the first time in the past years we see another major global power competing with the USA, and they with all its tactics and strategies are doing fine by the way.

On the contrary, the United States is not at all stable and is fighting hard to come out from the prevalent situation. According to The Washington Post, it said, Beijing is leaving no stone unturned to take the competitive advantage, after being the first country to start recovering from the novel coronavirus, to take over the industries of the future. One of their officials said “they have a post-virus strategy, and it is already underway”.

Now, what fears the emerging economies, like India is their interdependency on the global market. As India is not the hub of manufacturing it has no other option but to wait till the situation attain normalcy.

  • The recession shows similarity in the context of uncertainty as in both the scenarios the risks emerged from the world leading economies (US and China) and both somehow managed to overcome fast enough to take possible advantages. 
  • Another is collapse, the initial fall in the stock exchange of major countries have been parallel in both the crisis and both are reckoned as the greater recession since the Great Depression 1929. 
  • While The 2008 crisis mostly affected the countries like Argentina, China, Japan, Iceland, Lithuania, Greece and few other who were closely dependent on U.S and European economies. 
  • At variance, the current pandemic has not spared any single part of the world, irrespective of their dependency but the situation looks completely dire in developing countries, the people and the government both are scared to death because it has led to huge debts—and threatening governments with insolvency.

In a report Kenneth S. Rogoff, a Harvard economist and co-author of a history of financial crisis said that “I feel like the 2008 financial crisis was just a dry run for this,” he further added, “Everything depends on how long it lasts, but if this goes on for a long time, it’s certainly going to be the mother of all financial crises”.

The pandemic is already shaping up as the deepest and the deadliest dive on the record for the global economy and statistics are reflecting the same, the foreign direct investment saw the sharp decline by 40% this year, and it has been speculated that it will probably two to three economies to even return to their pre-pandemic phase.


In a nutshell, when contrasting 2020, with 2008, the position of 2020 seems graver and more alarming and one can closely relate it to the Great Depression of 1929. In former crisis, the strong stance on strategies helped the economy regained its strength again but here, the policies and strategies cannot alone help the economy build unless the situation naturally comes to normalcy as human interference can only make it worse. 

But, on a positive note, according to the UN Report, it has been said that recovery growth from this pandemic would be quick as compared to previous recessions. 


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