IMF: ‘Sharply negative’ global growth expected for 2020, ‘partial recovery’ likely for 2021
Global economic growth will turn “sharply negative” this year, with a “partial recovery” for 2021 only if the COVID-19 pandemic recedes in the second half 2020, the International Monetary Fund said on Thursday.
“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020,” IMF Managing Director Kristalina Georgieva said in a curtain-raiser speech ahead of next week’s IMF and World Bank Spring Meetings.
“Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year,” she said.
Amid the “extraordinary uncertainty” about the depth and duration of the crisis, the world could anticipate the worst economic fallout since the 1930s Great Depression, the IMF chief warned.
“The bleak outlook applies to advanced and developing economies alike,” she said. “This crisis knows no boundaries. Everybody hurts.”
The IMF has $1 trillion in lending capacity and is placing it at the service of its members, Georgieva said.
“We are responding to an unprecedented number of calls for emergency financing—from over 90 countries so far,” she said. “Our Executive Board has just agreed to double access to our emergency facilities, which will allow us to meet the expected demand of about $100 billion in financing.”
Lending programs have already been approved at record speed, including for the Kyrgyz Republic, Rwanda, Madagascar, and Togo, with many more to come, she said
Even in January, when what was later categorized as a pandemic was in its early development stage, leading world organizations had hoped that global growth would rise for this year, however modest.
The IMF, for example, predicted global growth to edge up from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021.
Its sister institution, the World Bank Group, was more prudent, but envisioned a 2.5 percent growth rate for this year, following a year during which weak trade and investment dragged the world economy to its feeblest performance since the 2008-09 global financial crisis.
But today, the world is confronted with a crisis like no other, with COVID-19 disrupting social and economic order at an unprecedented pace. Worst of all, it has killed at least 85,500 people while infecting more than 1.4 million others as of Thursday, according to the World Health Organization statistics.
All governments have sprung into action and there has been significant coordination, and that is encouraging news, Georgieva noted.
“Our Fiscal Monitor next week will show that countries around the world have taken fiscal actions amounting to about $8 trillion. In addition, there have been massive monetary measures from the G20 and others,” she said.
If the pandemic fades in the second half of the year, thus allowing a gradual lifting of containment measures and reopening of the economy, “our baseline assumption is for a partial recovery in 2021″, Georgieva said.
Still, she cautioned that it could get worse depending on many variable factors, including the duration of the pandemic.
The same uncertainty has partly contributed to the World Trade Organization’s (WTO) forecast of more steep shrinkage for goods trade this year than in the global financial crisis a decade ago.
In a report released Wednesday, the WTO said global trade would fall this year by between 13 percent and 32 percent and would likely see a recovery of between 21 percent and 24 percent next year, depending largely on the duration of the outbreak and the effectiveness of the policy responses.
To cope with the crisis, the IMF chief proposed a four-point plan: continuing with essential containment measures and support for health systems; shielding affected people and firms with large, timely, targeted fiscal and financial sector measures; reducing stress to the financial system and avoiding contagion; planning for a recovery phase, and minimizing the potential scarring effects of the crisis.