IMF predicts global economic growth to fall to -3% this year, can Bitcoin escape unscathed?

According to the quarterly report "World Economic Outlook" released by the International Monetary Fund (IMF), the global economic growth rate for 2020 is projected to decline to -3% due to the widespread supply chain disruptions, decreased corporate output, and rising unemployment caused by the COVID-19 pandemic. With Bitcoin (BTC) hitting a historical correlation with traditional financial markets, the question of whether Bitcoin will be affected by the macroeconomic downturn has become a significant issue.

IMF Predicts Global Economic Growth Rate to Fall to -3% This Year

The International Monetary Fund (IMF) released its World Economic Outlook quarterly report on April 14, stating that the "lockdown effect" triggered by the COVID-19 pandemic will result in the most severe economic downturn in 90 years. The report further predicts that the cumulative global GDP losses for 2020 and 2021 could amount to as much as $9 trillion.

The IMF points out that with economic activities contracting in over 170 countries worldwide, the global growth rate for 2020 is projected to fall to -3%. Developing countries are estimated to have a growth rate of around -1%, while advanced economies may experience a significant contraction of -6.1%.

On the other hand, the IMF further indicates that the economic impact of the "lockdown effect" will be the most severe economic downturn since the Great Depression and far more severe than the 2008 global financial crisis.

While the IMF's outlook for overall economic development ahead is not optimistic, the IMF also states that if the COVID-19 pandemic gradually recedes in the second half of 2020 and the rescue measures taken by countries effectively prevent bankruptcies of small and medium-sized enterprises, long-term unemployment, and financial pressures on the entire financial system, global growth rate in 2021 could rebound to 5.8%.

IMF's Forecast: Negative Impact on Bitcoin?

The International Monetary Fund's (IMF) global economic forecast may also be a bad omen for the Bitcoin and cryptocurrency markets, as recent data shows a record correlation between BTC and the S&P 500 index.

According to recent reports, during the extreme market turmoil in mid-March, the correlation between Bitcoin and traditional financial markets reached historically high levels. Although this correlation briefly decreased by the end of March, it has remained at a relatively high level throughout April.

With such correlation, most investors may worry whether Bitcoin will decline in the next one or two years along with the macroeconomic downturn. Spencer Bogart, a partner at Blockchain Capital, believes that after this economic crisis, Bitcoin will demonstrate more of its "digital gold" utility to the world, rather than continuing the sharp decline seen last month:

"As we navigate what will hopefully be the worst period in the global markets, Bitcoin will be a unique position. While it faces liquidity risks like all assets, its impact will be much smaller given the long-term economic headwinds we face in the coming months or years. And as the liquidity crisis passes, just as in the aftermath of the 2008 financial crisis, the dollars used for marginal investments will return to the assets least affected during prolonged economic weakness, and I hope Bitcoin will benefit from this asset allocation trend."

Related Reading

• Bitcoin's Correlation with S&P 500 Reaches All-Time High
• Is a Great Depression Happening? TED Asks Bridgewater Associates, Ray Dalio Says: No, It's a Great Collapse

Join Telegram now for the most comprehensive fintech information, blockchain insights, and industry examples!