On Thursday, April 9, Kristalina Georgieva, Managing Director of the IMF, gave a preview of the IMF’s economic outlook amidst the Coronavirus pandemic which will be the center of attention during the 2020 Virtual Spring Meetings next week. Georgieva emphasized the severity of the current crisis which, she said, calls for unprecedented action from the Fund. She predicts global growth will turn sharply negative in 2020.
While the trajectory of the pandemic remains uncertain, the IMF expects an economic crisis worse than the great recession of 2008. The economic outlook for more than 160 countries has turned from positive into negative growth.
“We are still faced with extraordinary uncertainty about the depth and duration of this crisis. It is already clear, however, that global growth will turn sharply negative in 2020, as you will see in our World Economic Outlook next week.
In fact, we anticipate the worst economic fallout since the Great Depression. Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020. Today, that number has been turned on its head. We now project that over 170 countries will experience negative per capita income growth this year.”
A partial economic recovery in 2021 will largely depend on whether or not the pandemic is under control so containment measures can be lifted. Something that is hard to predict, Georgieva emphasized.
“There is no question that 2020 will be exceptionally difficult. If the pandemic fades in the second half of the year, thus allowing a gradual lifting of containment measures and reopening of the economy, our baseline assumption is for a partial recovery in 2021. But again, I stress there is tremendous uncertainty around the outlook. It could get worse depending on many variable factors, including the duration of the pandemic. And crucially, everything depends on the policy actions we take now. “
Georgieva called again for a global response to support emerging markets and developing countries who will be hit hardest by the crisis.
“We estimate the gross external financial needs for emerging markets and developing countries to be in the trillions of dollars, and they can cover only a portion of that on their own, leaving residual gaps in the hundreds of billions of dollars. They urgently need help.”
To build a bridge to recovery, Georgieva highlighted four priorities: Continue containment measures and support for health systems, shield affected people and firms with large financial measures, reduce stress on the financial system and plan for a recovery phase. The IMF will do whatever is necessary to support member countries through this crisis, Georgieva promised.
“The encouraging news is that all governments have sprung into action and indeed there has been significant coordination. Our Fiscal Monitor next week will show that countries around the world have taken fiscal actions amounting to some 8 trillion dollars. And in addition, there have been massive monetary measures from the G20 and others. Many of the poorer nations are also taking both fiscal and monetary action, even as they grapple with this fundamental shock to their systems.”
You can read the full speech of the Managing Director Kristalina Georgieva here.