The COVID-19 pandemic would cause a global recession in 2020 that could be worse than the one triggered by the 2008-2009 global financial crisis, but world economic output should recover in 2021, the IMF said on Monday.
IMF managing director Kristalina Georgieva welcomed extraordinary fiscal actions already taken by many countries to boost health systems, and protect affected companies and workers, and steps taken by central banks to ease monetary policy.
“Even more will be needed, especially on the fiscal front,” she said.
Georgieva issued the new outlook after a conference call of G20 finance ministers and central bankers, who she said agreed on the need for solidarity across the globe.
“The human costs of the coronavirus pandemic are already immeasurable, and all countries need to work together to protect people and limit the economic damage,” Georgieva said.
More countries are imposing lockdown measures to contain the rapidly spreading coronavirus.
The outlook for global growth is negative and the IMF expects “a recession at least as bad as during the global financial crisis, or worse,” Georgieva said.
Earlier this month, Georgieva had warned that 2020 world growth would be below last year’s 2.9 percent rate, but stopped short of predicting a recession.
Georgieva on Monday said that a recovery is expected in 2021, but to reach it, countries would need to prioritize containment and strengthen health systems.
“The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be,” she said.
The IMF plans to step up emergency finance, Georgieva said, adding that 80 countries have already requested help and that the IMF stands ready to deploy all of its US$1 trillion lending capacity.
Advanced economies are generally in better shape to deal with the crisis, but many emerging markets and low-income countries face significant challenges, including outward capital flows, Georgieva said, adding that investors have already removed US$83 billion from emerging markets since the start of the crisis, the largest capital outflow ever recorded.
The IMF is particularly concerned about low-income countries in debt distress and is working closely with them to address those concerns, she added.
The IMF called again on members to contribute funds to replenish its Catastrophe Containment and Relief Trust, established in February 2015, to help the poorest countries.
The IMF is exploring other options with its members, Georgieva said.
Several low and middle-income countries have asked for an allocation from the Special Drawing Right, an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves, as was done during the global financial crisis, she said.
IMF members also need to provide additional swap lines with emerging market countries to address a global liquidity crunch, she said, adding that the IMF is exploring a proposal that would facilitate a broader network of swap lines, including through an IMF-swap-type facility.
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