Coronavirus: Expect recession worse than 2008 global crisis – IMF

2020-03-24
THE PUNCH Newspaper- ’Femi Asu

The International Monetary Fund has said the global economy will slide into a recession that is “at least as bad as during the global financial crisis or worse” this year on the back of the coronavirus pandemic.

The Managing Director, IMF, Kristalina Georgieva, in a statement on Monday, said many emerging markets and low-income countries were facing significant challenges.

She said, “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. This is a moment for solidarity.

“First, the outlook for global growth: for 2020 it is negative — a recession at least as bad as during the global financial crisis or worse. But we expect recovery in 2021. To get there, it is paramount to prioritise containment and strengthen health systems — everywhere.”

According to her, the economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.

“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,” Georgieva said.

She noted that more bold efforts would be needed, especially on the fiscal front.

She said, “Second, advanced economies are generally in a better position to respond to the crisis, but many emerging markets and low-income countries face significant challenges. They are badly affected by outward capital flows, and domestic activity will be severely impacted as countries respond to the epidemic.

“Investors have already removed $83bn from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded. We are particularly concerned about low-income countries in debt distress — an issue on which we are working closely with the World Bank.”

According to her, the IMF is concentrating bilateral and multilateral surveillance on the crisis and policy actions to temper its impact on its members.

The IMF boss said, “We will massively step up emergency finance —nearly 80 countries are requesting our help — and we are working closely with the other international financial institutions to provide a strong coordinated response.

“We are replenishing the Catastrophe Containment and Relief Trust to help the poorest countries. We welcome the pledges already made and call on others to join. We stand ready to deploy all our $1tn lending capacity. And we are looking at other available options.”

Georgieva said several low- and middle-income countries had asked the IMF to make a special drawing rights allocation, as it did during the global financial crisis.

“We are exploring this option with our membership,” she added.

 

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