Covid-19 to cause severe economic damage than 2009 recession: IMF

Prashasti Awasthi Mumbai | Updated on March 24, 2020

The International Monetary Fund Managing Director Kristalina Georgieva said on Monday that novel coronavirus pandemic will drag the world to severe economic damage and the repercussions of which will be worse than the 2009 recession, as per the IMF official release. Georgieva made a conference call to G20 Finance Ministers and Central Bank governors to raise her concerns. She asked G20 countries to cooperate with each other as the human costs of the pandemic are immeasurable.

Georgieva said in an official statement that 80 countries have requested emergency help from the IMF. She noted that the IMF is also considering making an SDR allocation to add liquidity to the global economic system as it did during the financial crisis. The move would further supplement IMF members' foreign exchange reserves. Georgieva said more swap lines are needed with emerging market countries. She mentioned that the IMF was considering its own IMF-swap type facility. She stressed on two points in particular:

Negative growth in 2020

She said in the official release that the outlook for global growth for 2020 is negative — a recession at least as bad as during the global financial crisis or worse. However, the IMF expects a recovery in 2021. She added: “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.”

Challenges faced by low-income countries

Georgieva mentioned that the 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. She further added, “Investors have already removed US$83 billion 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.”

A recent report published by the United Nations indicated that the economic and labour crisis created by the coronavirus pandemic could result in the loss of 25 million jobs across the globe.

Published on March 24, 2020

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