COVID-19 puts 90% of global economy on edge -IMF

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IMF News

The COVID-19 pandemic will leave about 170 countries, almost 90 per cent of the world worse off, the Managing Director, International Monetary Fund (IMF), Ms. Kristalina Georgieva, has said.

Ms. Georgieva, who spoke at a United Nations Event on Financing for Development in the Era of COVID-19 yesterday, said  the impact of the pandemic remain severe, saying, “ we are not out of the woods yet. Financial conditions remain dependent on uncertain economic and health developments, and countries are now facing the prospect of rising bankruptcies, which could affect banks, particularly those with weaker buffers.

“Let me start with a simple fact: we will end 2020 with a smaller global economy than at the start of the year. 170 countries, almost 90 percent of the world, will be worse off,” she said.

Georgiva said  the IMF projected global output to shrink by 3.0 per cent this year, adding that recent data have indicated that “the global contraction may be even worse than that.” She however said that partial recovery was expected in 2021.

She said actions taken after the global financial crisis to strengthen financial sector resilience, have paid off, with banks now well capitalised and macro-prudential regulations  providing the much needed protection.

She said by cutting interest rates and purchasing over $4 trillion of assets, among other measures,  major central banks helped abate strains in financial markets and ease global financial conditions.

The IMF chief said to counter the impact of the crisis and support recovery, there was need for continued fiscal support, especially for workers and small and medium-sized enterprises.

At the outset of the crisis, in just two months investors pulled more than $100 billion out of emerging markets—more than three times larger than during the global financial crisis, pointing out that a massive increase of liquidity by major central banks and the provision of swap lines for some emerging economies helped reversed the trend.

In April and May so far, emerging market sovereigns have raised some $77 billion from new debt issuance, mainly driven by investment-grade sovereigns, underscoring the importance of strong policies for resilience.

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