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 of 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 “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 it is placing 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.”
Even in January, when what later became a pandemic was in its early stages, leading world organizations had hoped that global growth would rise this year, however modestly. The IMF had 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 this year, following a year in 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 in modern times, with COVID-19 disrupting social and economic order at an unprecedented pace. Worst of all, it has killed nearly 92,800 people while infecting more than 1.5 million as of Friday, according to the World Health Organization.
All governments have sprung into action, and that is encouraging news, Georgieva said.
“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.
In an open letter to governments of the Group of 20 nations released on Monday night, a total of 165 former global leaders, top executives and scientists, including Ban Ki-moon, the former secretary-general of the United Nations, called for immediate internationally coordinated action to address the deepening global health and economic crises from COVID-19 that require “urgent specific measures that can be agreed on with speed and at scale”.
The letter urged G20 leaders to immediately agree to commit $8 billion to speed up research on vaccines and treatments for COVID-19 and ways to prevent a second wave of the coronavirus pandemic. A further $35 billion will be needed to support countries with weaker health systems and especially vulnerable populations, including the provision of vital medical supplies.
It said that all health systems are buckling under the pressures of the virus.
“Yet if we do nothing as the disease spreads in poorer African, Asian and Latin American cities and townships and in fragile communities that have little testing equipment, ventilators or medical supplies; and where social distancing and even washing hands are difficult to achieve, COVID-19 will persist there and reemerge to hit the rest of the world with further rounds that will prolong the crisis,” it warned.
In terms of economic growth, the letter said the world’s aim should be “to prevent a liquidity crisis turning into a solvency crisis, and a global recession becoming a global depression”.
“To ensure this, better coordinated fiscal, monetary, central bank and anti-protectionist initiatives are needed,” it said.
It said that the emerging economies, in particular those of the poorest countries, need special help, not the least in ensuring that support reaches all those affected by the drastic decrease in economic activity.
It also urged the international community to waive this year’s poorer countries’ debt repayments, including $44 billion due from Africa, and consider future debt relief to allow poor countries the fiscal space to tackle the health and economic impact of the pandemic.