The global economy will take much longer to recover fully from the shock caused by the new coronavirus than initially expected, the head of the International Monetary Fund said, and she stressed the danger of protectionism. Managing Director Kristalina Georgieva said the Fund was likely to revise downward its forecast for a 3% contraction in GDP in 2020, but gave no details. That would likely also trigger changes in the Fund’s forecast of a partial recovery of 5.8% in 2021.
The IMF is due to release new global projections in June. The global outlook remains a huge focus for finance ministers from the Group of Seven advanced economies, who will meet remotely on Tuesday, according to the U.S. Treasury. Georgieva told Reuters the Fund was focused on risks such as high debt levels, increased deficits, unemployment, bankruptcies, increased poverty and inequality during the recovery period. But she said the crisis was also boosting the digital economy, offering a chance to boost transparency and e-learning, and give even small firms access to markets.
Asked about renewed tensions between the United States and China – the world’s two largest economies, Georgieva said she was urging member countries to maintain open communication and trade flows that had underpinned global growth for decades. Tensions between the United States and China have spiked in recent weeks, with officials on both sides suggesting a hard-won deal that defused a bitter 18-month trade war could be abandoned months after it was signed. Georgieva warned against retreating into protectionism as a result of the crisis.
The IMF was created after World War Two to foster financial stability, facilitate trade and reduce poverty around the world. It has provided emergency financing to 56 countries since the crisis began and will decide on 47 additional requests as quickly as possible, Georgieva said. An IMF spokesman said some $21 billion in emergency financing, which carries very low interest rates, had been disbursed thus far. Georgieva said the Fund could also provide grants to help the poorest countries cover their debt service payments to the IMF through the end of the year, after raising new lending commitments from its members.
Source: Reuters
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