Partial recovery in 2021 only if pandemic fades this year
A chilling analysis of economic prospects was made public by the International Monetary Fund on Thursday afternoon, suggesting that the world is heading for the worst global recession since the Great Depression of more than a century ago.
The Fund’s Managing Director, Kristalina Georgieva described current events as a “gigantic, dramatic development”, which brought the world economy at a virtual standstill.
The IMF said that it was ready to place all its financial power to support the world overcome this crisis, which is estimated to reach $1 trillion. However, the Fund acknowledges that if the pandemic stretches longer than expected, or if a second wave occurs early next year, these might not be enough.
Particular concern at emerging economies
The Fund is particularly concerned at the economic and social impact within emergent economies, including Africa, Asia and South America, markets which are not prepared to deal with a health crisis and economic troubles at the same time. To add insult to injury to these economies’ prospects, investors have already removed US$83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded.
In this context, Georgieva said the IMF was particularly concerned about low-income countries in debt distress—an issue on which we are working closely with the World Bank.
For this reason, the Fund is urging richer countries to donate $1.4 billion between them so that it can coordinate debt relief to low-income countries which can be spent on health rather than debt repayment. The IMF and the World Bank are jointly calling on richer countries also to postpone present debt repayment of the poorest nations.
Governments worldwide have committed 8 trillion dollars
The IMF noted that governments around the world have taken fiscal measures reaching around 8 trillion dollars. Georgieva insisted that countries should provide firms with targeted fiscal and financial measure while at the same time planning for recovery. The Fund’s spokesperson added that “We strongly support the extraordinary fiscal actions many countries have already taken to boost health systems and protect affected workers and firms. We welcome the moves of major central banks to ease monetary policy. These bold efforts are not only in the interest of each country, but of the global economy as a whole”.
Despite the glum outlook, the IMF expresses confidence that the world will get out of the economic crisis by 2021: “To get there, it is paramount to prioritize containment and strengthen health systems—everywhere. The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.”