The surging number of Coronavirus cases across the globe would push most economies into recession the International Monetary Fund has predicted.
Kristalina Georgieva, IMF Managing Director, said global growth will turn sharply negative in 2020, the worst economic fallout since the Great Depression.
“We projected that over 170 countries will experience negative per capita income growth this year and this bleak outlook applies to advanced and developing economies alike. This crisis knows no boundaries. Everybody hurts,” she said.
To cushion the effect on countries, the IMF boss identified four priority areas in building bridge to recovery. This include the continuation of essential containment measures and support for health systems, through prioritization of health spending for testing and medical equipment; payment of doctors and nurses; and ensure that hospitals and makeshift clinics can function.
“For many countries—particularly in the emerging and developing world—this means carefully reallocating limited public resources. It also means increasing the flow of resources to these countries,” she said.
She further advised that governments must shield affected people and firms with large, timely, targeted fiscal and financial sector measures. This includes tax deferrals, wage subsidies and cash transfers to the most vulnerable; extending unemployment insurance and social assistance; and temporarily adjusting credit guarantees and loan terms.
“We need to prevent liquidity pressures from turning into solvency problems and avoid a scarring of the economy that would make the recovery so much more difficult,” she said.
Third on the list of priorities is the reduction of stress to the financial system and avoid contagion. Noting that banks have built up more capital and liquidity over the past decade, and their resilience will be tested in this rapidly changing environment.
“Enhancing liquidity for a broader range of emerging economies would provide further relief. Importantly, it would also lift confidence,” she said.
And lastly, governments must also plan for the recovery phase noting that as measures to stabilize the economy take hold and business starts to normalize, there is the need to move swiftly to boost demand.
“Those with greater resources and policy space will need to do more; others, with limited resources will need more support,” she added.
On the part of the IMF to cushion the effect of dwindling economic fortunes among member countries, she announced $1 trillion in lending capacity to its members.
She acknowledged the unprecedented number of calls for emergency financing— from over 90 countries so far, noting that its Executive Board has agreed to double access to our emergency facilities, which will allow it to meet the expected demand of about $100 billion in financing.
