World faces worst time since Great Depression, says IMF’s Georgieva

Updated April 10, 2020

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There is  “tremendous uncertainty around the outlook” and the duration of the pandemic,  IMF chief Kristalina Georgieva said. — AP/File
There is “tremendous uncertainty around the outlook” and the duration of the pandemic, IMF chief Kristalina Georgieva said. — AP/File

WASHINGTON: The global coronavirus pandemic is causing an economic crisis unlike any in the past century and will require a massive response to ensure recovery, IMF chief Kristalina Georgieva said on Thursday.

The warnings about the damage inflicted by the virus already were stark, but Georgieva warned that the world should brace for “the worst economic fallout since the Great Depression.” With the number of cases now surpassing 1.5 million worldwide with nearly 89,000 deaths in 192 countries and territories, much of the global economy has been shut down to contain the spread of the virus.

The International Monetary Fund expects “global growth will turn sharply negative in 2020,” with 170 of the fund’s 180 members experiencing a decline in per capita income, Georgieva said.

Just a few months ago, the fund was expecting 160 countries to see rising per capita income, she said in a speech previewing next week’s spring meetings of the IMF and World Bank, which will be held virtually due to the restrictions imposed due to the Covid-19.

‘It could get worse’

Even in the best-case scenario, the IMF expects only a “partial recovery” next year, assuming the virus fades later this year, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted.

But she added this ominous caution: “It could get worse.” There is “tremendous uncertainty around the outlook” and the duration of the pandemic, Georgieva said.

The IMF will release its latest World Economic Outlook on Tuesday, with grim forecasts for its members this year and next. In January, the IMF projected global growth of 3.3 per cent this year and 3.4pc in 2021. But that was a different world.

The US economy has purged 17 million jobs since mid-March, with the latest weekly data issued Thursday showing 6.6 million workers filed for unemployment benefits, and economists projecting a double-digit jobless rate this month.

The World Bank said on Thursday the pandemic might cause the first recession in Africa in 25 years.

Recovery depends on decisive actions now, Georgieva said. The IMF has $1 trillion in lending capacity and is responding to unprecedented calls from 90 countries for emergency financing.

Send more lifelines

Countries already have taken steps worth a combined $8 trillion, but Georgieva urged governments to do more.

“Lifelines for households and businesses are imperative” to “avoid a scarring of the economy that would make the recovery so much more difficult.”

The IMF board approved a doubling of emergency lending facilities which will provide about $100 billion, and is moving ahead with debt relief for the poorest countries, and also help for countries with unsustainable debt levels.

“The bleak outlook applies to advanced and developing economies alike. This crisis knows no boundaries. Everybody hurts,” Georgieva said.

She noted that about $100 billion in investments already had fled emerging markets — more than three times the capital exodus seen in the 2008 global financial crisis.

US officials have scrambled to apply a tourniquet to stem the bleeding of jobs in the world’s largest economy and keep the financial system from freezing up.

Published in Dawn, April 10th, 2020