WASHINGTON:
The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said Friday.
“It is clear that we have entered a recession” that will be worse than in 2009 following the global financial crisis, she said in an online press briefing.With the worldwide economic “sudden stop,” Georgieva said the fund’s estimate “for the overall financial needs of emerging markets is $2.5 trillion.”
The world is in the face of a devastating impact due to the coronavirus pandemic and has clearly entered a recession, the International Monetary Fund said on Friday, but projected a recovery next year.
“We have reassessed the prospects for growth for 2020 and 2021. It is now clear that we have entered a recession as bad or worse than in 2009. We do project recovery in 2021,” IMF Managing Director Kristalina Georgieva told reporters at a news conference.
Georgieva was addressing the press after a meeting of governing body of the IMF, the International Monetary and Financial Committee. Representing 189 members, the body met virtually to discuss the unprecedented challenge posed to the world by COVID-19.
The key to recovery in 2021, she said, is only if the international community succeeds in containing the virus everywhere and prevent liquidity problems from becoming a solvency issue.
“The US is in recession, as is the rest of the advanced economies of the world. And in a big chunk of developed and emerging markets in developing economies. How severe? We are working now on our projections for 2020, Georgieva said in response to a question.
But she warned that estimate “is on the lower end.” Governments in emerging markets, which have suffered an exodus of capital of more than $83 billion in recent weeks, can cover much of that, but “clearly the domestic resources are insufficient” and many already have high debt loads.
The IMF chief said 81 emergency financing requests, including 50 from lower-income countries, have been received. She said current estimate for the overall financial needs of emerging markets is 2.5 trillion dollars.
“We do know that their own reserves and domestic resources will not be sufficient,” Georgieva said, adding that the fund is aiming to beef up its response “to do more, do it better, do it faster than ever before.”
The IMF chief spoke to reporters following a virtual meeting with the Washington-based lender’s steering committee, when she officially requested a increase in the fund’s fast-deploying emergency facilities from their current level of around $50 billion.
She also welcomed the $2.2 trillion economic package approved by the US Senate, saying “it is absolutely necessary to cushion the world’s largest economy against an abrupt drop the economic activities.”The new projections are expected in the next few weeks.
Stressing that while containment is the main reason for the economy to stand still and get into a recession, she said containment is very necessary to come out of this period and step in to recovery. “Until the virus is not contained, it would be very difficult to go to the lives we love.”
“A key concern about a long-lasting impact of the sudden stop of the world economy is the risk of a wave of bankruptcies and layoffs that not only can undermine the recovery. But can erode the fabric of our societies,” the IMF chief said.
To avoid this from happening, many countries have taken far-reaching measures to address the health crisis and to cushion its impact on the economy, both on the monetary and on the fiscal side, she said.
“We believe this is on the lower end. We do know that their own reserves and domestic resources will not be sufficient,” she added.
The G-20, a day earlier, reported fiscal measures totalling some 5 trillion dollars or over 6 per cent of the global GDP.
Responding to another question, Georgieva said the IMF is projecting recession for 2020.
“We do expect it to be quite deep and we are very much urging countries to step up containment measures aggressively so we can shorten the duration of this period of time when the economy is in standstill,” she said.
“And also to apply well-targeted measures, primarily focusing on the health system to absorb that enormous stress that comes from coronavirus. And on people, businesses and the financial system, I am very pleased to say that when we went through countries’ responses, that sense of targeted fiscal measures is there and are also very impressive to see the size of these measures,” she added.
“Countries are doing all they can on the fiscal and on the monetary front. We have heard from our members’ very impressive decisions taken over the last days,” the IMF chief said.
“We also want to caution that as we are responding now, we want to make the recession as possibly short and not too deep. We also want to think about what is going to follow the recovery and make sure that we are putting forward measures that can be supportive in this regard,” she said.
Meanwhile, While, the US surpassed China in Covid-19 cases, global infections have crossed 597,267 mark. As many as 27,360 people have died so far due to the virus..
UK Prime Minister Boris Johnson on friday tested positive for coronavirus.