Via IMF (Den Internationale Valutafond)

Transcript of the Press Conference on the Release of the World Economic Outlook Update







June 24, 2020
















Speakers:

Gita Gopinath, IMF Economic Counsellor and Director, Research Department

Gian Maria Milesi-Ferretti, Deputy Director, Research Department

Malhar Nabar, Division Chief, Research Department

Raphael Anspach, Senior Communications Officer, Communications Department

 

MR. ANSPACH: Welcome to the Conference on the World Economic Outlook update, which we
are releasing today. With us to talk about the report are Gita Gopinath,
she’s our Economic Counsellor and Director of the IMF Research Department;
Gian Maria Milesi-Ferretti, Deputy Director of the IMF Research Department;
and Malhar Nabar, Division Chief in the Research Department.

Gita will have introductory remarks and then we’ll be happy to take your
questions. I encourage you all to send those questions to media@IMF.org.
With that, Gita, the floor is yours.

MS. GOPINATH:
Thank you, Raphael. Welcome everyone to this update of the World Economic
Outlook. The covid-19 pandemic pushed economies into a great lockdown that
saved lives but also triggered the worst recession since the Great
Depression.

Over 75 percent of countries are now reopening at the same time as the
pandemic intensifies in many emerging and developing economies. Several
countries have started to recover. However, in the absence of medical
solution, the strength of this recovery is highly uncertain, and the impact
across sectors and countries highly uneven.

Compared to our April World Economic Outlook, we are now projecting a
deeper recession in 2020 and a slower recovery in 2021. Global output is
projected to decline by minus 4.9 percent in 2020, which is 1.9 percentage
points below our April forecast. Followed by a partial recovery with growth
projected at 5.4 percent in 2021. You can see that on the slide here.

Now these projections imply a cumulative loss to the global economy over
two years of over $12 trillion from this crisis. The downgrade from April
reflects worse than anticipated outcomes in the first half of this year and
expectation of more persistent social distancing into the second half of
this year, and damage to supply potential.

Now a high degree of uncertainty surrounds this forecast with both upside
and downside risks. On the upside, better news on vaccines and treatments
and further policy support could trigger a faster recovery. On the
downside, further waves of infections can reverse increased mobility and
spending and rapidly tighten financial conditions, triggering debt
distress.

Geopolitical tensions and trade tensions could damage fragile global
relations at a time when trade is projected to collapse by 12 percent.

Now this crisis is a crisis like no other and will have a recovery like no
other. First, the unprecedented global sweep of this crisis hampers
recovery prospects for export-dependent economies and jeopardizes the
prospects for income convergence between developing and advanced economies.

We are projecting a synchronized deep downturn in 2020 for both advance
economies and emerging market and developing economies with over 95 percent
of countries projected to have negative per capita income growth in 2020. A
cumulative hit to GDP growth over 2021 for emerging markets and developing
economies, excluding China, is expected to exceed that in advanced
economies.

Now second, as countries reopen the pick-up is uneven. On the one hand pent
up demand is leading to a surge in spending in some sectors, like retail.
On the other hand contact-intensive sectors, like hospitality, tourism, and
travel, remain depressed. So countries that are heavily reliant on these
sectors are likely to be deeply impacted for a prolonged period.

Third, the labor market has been severely hit and at record speed. And
particularly so for low income workers, and semi-skilled workers who do not
have the option of teleworking. With activity in labor in terms of sectors
like tourism and hospitality expected to remain subdued, a full recovery in
the labor market may take a while, worsening inequality and raising
poverty.

Now on the positive side the recovery is benefitting from exceptional
policy support, particularly in advanced economies, and to a lesser extent
in emerging market and developing economies that are more fiscally
constrained.

Global fiscal support now stands at over $10 trillion and monetary policy
has eased dramatically. In many countries these measures have succeeded in
improving livelihoods and preventing large scale bankruptcies, plus helping
to reduce lasting scars and aiding a recovery.

Now this exceptional support, particularly by major Central Banks, has also
driven a strong recovery in financial conditions despite grim real
outcomes.

Equity prices have rebounded, credit spreads have narrowed, and portfolio
flows in many emerging and developing economies have stabilized, alongside
some currencies appreciating that were previously depreciating.

So by preventing a financial crisis, policy support has helped avert worse
real outcomes. At the same time the disconnect between real and financial
markets raises concerns of excessive risk taking, and this is significant
vulnerability.

So we are definitely not out of the woods, we have not escaped the great
lockdown. Given this tremendous uncertainty, policy makers should remain
vigilant and adapt policies as the situation evolves. Substantial joint
support from fiscal and monetary policy will need to be continued,
especially in countries where inflation is projected to stay low.

At the same time, countries should ensure proper fiscal accounting and
fiscal transparency and ensure that Central Bank independence is
maintained.

Now a priority is to manage health risks as countries reopen. This requires
continuing to build health capacity, widespread testing, tracing,
isolation, and practicing safe distancing. These measures help contain the
spread of the virus, reassure the public that new outbreaks can be dealt
with in an orderly fashion, and minimize economic disruptions.

The international community must further expand financial assistance and
expertise to countries with weaker health capacity. Much more needs to be
done to ensure adequate and affordable production and distribution of
vaccines and treatments when they become available.

Now in countries where activities are being severely constrained by the
health crisis, people directly impacted should receive income support
through unemployment insurance and cash transfers. And impacted firms
should also be supported for loans, credit guarantees, and grants.

Now to more effectively reach the unemployed in countries with large
informal sector, the digital payment system should be expanded and
complemented with in-kind support for food and medicine and other household
staples channeled through local governments and community organizations.

In countries that have begun to reopen and where the recovery is under way,
policy support will need to gradually shift towards encouraging a return to
work and to facilitating a reallocation of workers from sectors that are
shrinking to those that are growing.

Now this could take the form of spending on worker training and hiring
subsidies that are targeted at workers that are at the greatest risk of
becoming long-term unemployed.

Now supporting a recovery would also involve actions to repair balance
sheets and address debt overhang. This will require strong insolvency
frameworks and mechanisms for restructuring and disposing of distress debt.
The policy support should also gradually shift from being targeted to being
more broad-based. Where fiscal space permits, countries should undertake
green public investment to accelerate the recovery and support longer-term
climate goals. To protect the most vulnerable in society expanded social
safety nets will have to remain in place for a long time.

Now the international community must ensure that developing economies have
the financing that they need to undertake critical spending. This should
take the form of concessional financing, debt relief, and grants. And also
that emerging and developing economies have access to international
liquidity via ensuring financial stability, financial market stability,
Central Banks swap lines, and deployment of a global financial safety net.

Now this crisis will also generate medium-term challenges. Public debt is
projected this year to reach the highest level ever, even past the World
War II peak, in both advanced and emerging market and developing economies.
So countries will need sound fiscal frameworks for medium-term
consolidation through cutting back on wasteful spending, widening the tax
base, minimizing tax avoidance, and greater progressivity in taxation in
some countries.

At the same time this crisis also presents an opportunity to accelerate the
shift to a more productive, sustainable, and equitable growth, to
investment in new green and digital technologies, and wider social safety
nets.

Global cooperation is ever so important in this truly global crisis. All
efforts should be made to resolve trade and technology tensions, while
improving the multilateral rules based trading system.

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The IMF will continue to do all it can to ensure adequate international
equity, provide emergency financing, support the G20 debt service
suspension initiative, and provide advice and support to countries during
this unprecedented crisis. Thank you.

MR. ANSPACH: We have a number of questions that have already come here. So, let me
start with the first question from the Daily Mail in the UK. The question
is whether this is the sharpest recession since the Great Depression?

MS. GOPINATH: This is an unprecedented crisis, and this is indeed the worst recession
since the Great Depression. It was already the worst recession since the
Great Depression in April when we had projected growth for 2020 to be at
minus 3 percent, but now at minus 4.9 percent that is even more strongly
true. And no country has been spared. Both emerging markets, developing
economies, advanced economies, have all been very badly hit during this
crisis.

MR. ANSPACH: Moving on to a next question here from Eric Martin of Bloomberg. The
question is, the WEO highlights the disconnect between financial markets
and economic fundamentals. Stock markets in particular are often several
months ahead of the real economy. To what extent do you think the
disconnect between financial markets and economic fundamentals may be
explained by investors looking ahead on an economic rebound?

MS. GOPINATH:
This crisis has called for exceptional policy support both from fiscal
policy and monetary policy, and that has been delivered this time around.

Central Banks, especially major Central Banks in the world have undertaken
extraordinary steps to ensure smooth market functioning, keep interest
rates low, provide liquidity. Now what that has meant is that that has led
to a substantial improvement in financial conditions since our last April
outlook, and that seems somewhat disconnected by real outcomes.

So I would say the two important factors we think of as being important for
this rebound of financial conditions is one, the extraordinary policy
support, and second, that in the face of tremendous uncertainty about where
the world economy is headed, I think markets are taking a more positive
outlook for the future. I think the combination explains what we are seeing
right now.

MR. ANSPACH: Moving to a question from Yicai, and moving to the recovery. The question
is, what kind of recovery are you expecting? Is it more likely to be V, U,
or W shape? What is the major challenge down the road for the recovery?

MS. GOPINATH:
So the worst for the global economy was what we saw in the first and second
quarter of this year, and especially in the second quarter for most
economies. So that was the definite collapse. Now since then, if you look
at recent data that’s coming in, you do see signs of improvement. In some
places there’s still a contraction, but it’s small — but in others we’re
actually seeing signs of expansion in those who have opened up for a while.
Now we describe the recovery as still highly uncertain in terms of the
strength of the recovery. So, while we could say that maybe the world has
bottomed out for now, and we are in a recovery phase. But still the
strength of the recovery is highly uncertain because there is no solution
yet to the health crisis.

So, outcomes could be on the plus positive or the negative side. You could
have better news in treatment and vaccines and the improvement could be
even faster. But it could also be worse if indeed the virus cannot be
contained and you have second waves.

In addition, you have concerns about escalating trade tensions,
geopolitical tensions and also, a reversal in financial conditions. So, a
tightening in financial conditions could trigger that distress. So, this is
highly uncertain and it’s uneven because some sectors are recovery much
faster than contact intensive sectors like hospitality and tourism.

MR. ANSPACH: Maybe one last question before we move on to country and region specific
questions. This question is from La Tribune and it’s on debt. The question
is, governments are going in for massive fiscal stimulus globally in
response to the pandemic. How concerned are you about the risk in the long
term of rating downgrades or buildup of debt, especially for emerging
market countries?

MS. GOPINATH:
So, this is a crisis that calls for substantial support across all
countries. And that is what we have seen happening in many countries of the
world. In the absence in that support to protect livelihoods and to prevent
large scale bankruptcies, if that was not in place then we would have ended
up with a recovery that will be much weaker and would have taken much
longer to get back up to pre-crisis trends.

So, this is an investment that countries had to make now but keeping that
in mind, indeed when the recovery is stronger. We are in a better place
with the health crisis, better able to manage it, then countries will have
to undertake a medium fiscal management and through a combination of
expenditure and revenue measures.

And as of now, countries should make sure that they are following best
practices. That they are putting proper safeguards in place using, you
know, making sure there’s proper fiscal accounting and fiscal transparency.
But as of now, the need of the hour is for this kind of policy support.

MR. ANSPACH: So, moving on to some country specific questions. Here is a question from
EFE. Given that the cases are growing in the U.S. and Latin America, could
growth forecasts for both be downgraded in the near future?

MS. GOPINATH:
This is an important downside risk. Indeed, like I said, we’re not out of
the woods. The health crisis is not over and so we could see a potential
second wave. What we’ve assumed in our baseline number is that there could
be an increase in the number of infections. However, we are not going to
see the kind of stringent lockdowns that were needed in the first half of
this year.

Now, if that changes and indeed, you need the same kind of stringency of
containment going forward, then that is a significant downside risk. And
something we’ve explored in the WEO when we’ve looked at the impact of a
second wave that hits in say early 2021. In that case, instead of growth in
2021 being 5.4 percent it would be 0 percent so this would be a dramatic
hit.

MR. ANSPACH: I’m going to stay with Latin America. I have a question on Brazil from
Agencia Estado. And the question is, is the huge increase in Coronavirus
cases in Brazil the major factor that led the IMF to change its forecast
for the GDP drop in 2020?

MS. GOPINATH:
The rise in Coronavirus cases and the difficulties in containing the
pandemic is indeed one of the factors for downgrades in many countries. Now
Brazil has the same challenges as many emerging markets do in terms of
having to deal with this virus when you have a very dense population. And
that is one important factor for the downgrade. But let me also bring in
Gian Maria here if you’d like to add something.

MR. MILESI-FERRETTI: I will just add that in addition to the, you know, the measures to
contain the spread of the virus that take a toll on economic activity. You
have an overall worsening of our global forecast which, of course matters
for the prospects of the region as a whole and more generally for the
prospects of Brazil’s main markets. So, those factors play in too.

MR. ANSPACH:
Moving on now to Asia, I have a question on Japan from Asahi Shimbum. The
question is, could you expand on the reason for the downward revision of
Japan’s growth.

MS. GOPINATH:
In the case of Japan, we’ve had a downgrade, it’s a very small downgrade.
But that reflects the impact of containment measures which somewhat offsets
the additional policy support that has come through. So, that is one of the
main reasons for it. In addition, of course, given that the global economy
is expected to do worse and we have downgrades for the global economy,
countries that depend on exports, countries that depend on tourism are
being negatively impacted. However, just to point out that the downgrades
that we had, relatively speaking, Japan is a small one.

MR. ANSPACH:
Staying in Asia, moving now to India. This is a question from CNBC India.
Why has India’s forecast been cut by a sharp 6.4 percent to -4.5 percent
for 2020. Does the IMF think the government’s fiscal stimulus response has
been inadequate?

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MS. GOPINATH: There are two main reasons for the downgrade for India. One, the partial
lockdown has lasted much longer than we had assumed in our April numbers.
And second, because we are still seeing a rise in cases in India, we are
projecting a slower recovery. But let me also bring in Malhar here if you
would like to add, especially on the fiscal side.

MR. NABAR: Sure, thank you. Good morning everyone. Just to add to Gita’s points
here. We have seen a fiscal response there in India, liquidity support,
we’ve seen support to effected households and farmers. And this has, of
course, helped avert an even worse downturn. Going forward, there’s scope
for, especially on the monetary side, we see scope for monetary policy
support. The RBI, Reserve Bank of India, has also come in quite
aggressively with interest rate cuts with liquidity support actions. All of
these are helping to shore up sentiment to keep liquidity — the provision
of credit going in the system and this should help prevent an even deeper
slide. But with further room for support there from the monetary policy
side, we could see that this could be activated in a way that actually
prevents and even deeper slide.

MR. ANSPACH: A question now on sub-Saharan Africa. And the question is from Today News
Africa. Could you talk a bit more about the situation in sub-Saharan
Africa?

MS. GOPINATH: In the case of sub-Saharan Africa, we also have significant downgrades
and especially for the larger economies South Africa, Nigeria. There is
considerable heterogeneity in terms of the impact of the pandemic itself.
But we have the large economies that have very large domestic disruptions.
And also, we have the fact that many oil exporters have seen a big drop in
oil prices, though there’s been a recovery recently but is still well below
the pre-crisis levels.

On top of that, you have a big drop in exports, a reduced demand for
tourism. So, different countries are being affected differentially by this
crisis. But again, sub-Saharan Africa has also been hit very badly in this
crisis.

MR. ANSPACH: Thank you, Gita. Now moving onto the Middle East. I have a question here
which states, what are your views for oil producing countries in the Middle
East? And do you see a need for more support from central banks in the
region?

MS. GOPINATH: In the case of the countries in the Middle East, they’ve been hit doubly.
One of course by the health crisis like everybody else and the general
collapse in economic activity everywhere else in the world. But also, the
sharp drop in oil prices which has also necessitated a cut in production.
There’s been a drop in demand but also a cut in production by (inaudible).
And so, the combination has led to a downgrade of their focus. Let me also
bring in Gian Maria here if you’d like to add something.

MR. MILESI-FERRETTI: Yes. Clearly very big hit to oil exporters. And in terms of monetary
policy support, of course, for a number of countries in the regions have
exchange rate pegs, have fixed exchange rates and hence have much more
limited scope for monetary policy to support economic activity through
interest rate cuts for that reason.

I would also emphasize that unfortunately, the hit is not just to oil
exporters. You have, of course, the pandemic has been aggressive elsewhere
as well, even in importers. And some of the oil importers are hit very
heavily by sharp decline in remittances as activity in oil exporters where
many of these expatriates from these countries live has taken a heavy hit.
So, you have an external demand hit, reduced demand for exports and you
have as well, lower remittances. So, it’s a very difficult situation for
many countries in the region.

MR. ANSPACH:
So, I’m not going to move back to Asia and China. Could you tell us the
reasons for the downgrade of China’s GDP growth and how do you see China’s
recovery pace?

MS. GOPINATH:
So, for China, we are projecting growth at 1 percent for 2020. We’ve had a
downgrade but it’s a small downgrade of .2 percentage points. The main
reason for the downgrade is the slower recovery in private consumption
which has offset to some extent the better news that you got in terms of
investment spending and services sectors outcomes.

For 2021, we also have a slight downgrade which reflects the fact that we
expect the global economy to be recovering but to recovery slowly. So, the
negative impact with the export channel has an impact on China.

In the case of China for the speed of the recovery, we do think the worst
as of now is behind for the case of China. We are seeing a recovery which
is really well under way and has strength to it. So, we should expect to
see the economy being much better in the coming months.

MR. ANSPACH:
Now a more broader question on global supply chains and trade and this is
from the People’s Daily. Some countries call for the back flows of
manufacturing. How do you see the pandemic’s impact on the global supply
chain or which industries will shift?

MS. GOPINATH:
So, the pandemic has affected global supply chains just by the nature of
the crisis. You have had factories shutting down in many parts of the world
and that has of course led to disruptions in trade flows around the world.
The question though is what happens as the recovery takes hold and we
actually move past the health crisis. And there, it is very important for
countries to continue to keep open trade channels to improve the trading
system as needed.

In terms of which countries and sectors are going to get affected, I think
it’s very early to say at this point because these chains don’t move that
quickly. But we can see some countries deciding to localize production and
that would be expected to some extent. But again, in terms of seeing the
overall impact, I think we’ll have to wait for some more data.

MR. ANSPACH:
This is a clarification question from Reuters. Could you talk about why the
IMF views this recession since as the worst since the Great Depression
while the World Bank calls it the worst since the 1945-46 recession at the
close of World War II.

MS. GOPINATH:
I mean, so we are looking here at just overall GDP growth. I know that the
World Bank was looking at some per capita numbers. But I think the real
relevant benchmark is that if you look at the overall impact on global
growth during the Great Depression, it was around -10 percent and we are
now at -4.9 percent. So, this is certainly not as bad as the Great
Depression. We are also not expecting it to last as long as the Great
Depression is because we’re expecting to see recoveries much faster. But
again, this is quite a remarkable crisis.

MR. ANSPACH:
A question from South China Morning Post. The question is, you have
suggested that fiscal supports are likely to remain at current levels but
at the number of possible scenarios suggested that this support may need to
be increased in size. Just what are the ultimate limits on such support
given the extremely accommodating attitude of central banks and the
suggestion that modern — monetary theory has somehow eliminated
constraints on government debt?

MS. GOPINATH:
So, this again, is a crisis that requires all hands on deck and both
emerging and developing countries, and advanced economies needing to spend
and ensure that livelihoods are maintained, and firms are in shape to
recover. To know what the extent of it is? Of course there is substantial
space in many in some advanced economies, especially reserve currency
issuers, you have the expectation that interest rates are going to stay low
for a very long time. That gives you space.

And again, monetary policy has space because there is a lot more that can
be done in terms of asset purchases as and when needed to satisfy their
mandate. But I would just like to caution the point that there is no
constraint on governments, and that governments can indiscriminately print
money and finance spending.

That is certainly not a given. We are in this world because a very strong
monetary policy frameworks and fiscal frameworks that have helped countries
be able to borrow at very low rates, but if we give up on that, then we can
certainly move to a different state of the world where borrowing costs can
go up quite dramatically for countries.

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MR. ANSPACH:
Thanks, Gita. Another question from the Daily Mail here, and the
question is, Japan looks to have thrown more resources at combating the
COVID-19 economic scarring than any other advanced economy on a
proportional basis. Would you recommend other advanced economies to do the
same?

MS. GOPINATH:
Advanced economies around the world are actually doing very large amounts
of fiscal support. You know, if you look at it compared to the global
financial crisis, it is the order of (inaudible), it’s many multiples of
what we saw then. I think what governments have to now keep in mind that it
is important to remain vigilant, it’s important not to back off very
quickly, but to do so only gradually, because this crisis is not over,
there will be need for support for firms and for households. And also as
the crisis was, as the recovery evolves, it’s important to move the
instruments towards supporting return to work, towards supporting a
reallocation of workers, and capital towards sectors that have better
growth prospects than the ones that don’t. So the nature of the policy
intervention will have to change over time but, you know, more will be
needed, and many countries are doing a lot already.

MR. ANSPACH:
We are coming to the end of the press conference, so I may take two or
three more questions. So, this question, again, on the recovery and
financial conditions. The question is, given the current pace of recovery,
when do you expect the easing financial conditions to be tightening?

MS. GOPINATH:
I think here’s tremendous uncertainty about what will happen with financial
markets. We are seeing a recovery now. Like we said, there are both upside
risks to this recovery, you could have better news for the medical front,
and things could get better much faster. People might decide that they
don’t need to social distance as much, because they have greater
confidence.

On the other hand, you could have second waves that would trigger
tightening financial conditions. So it’s very hard to see which way that
will go. I think what we do know from what major central banks have said,
is that they intend to keep rates low for long, and so that they will do
their best possible to ensure orderly financial market conditions.

MR. ANSPACH:
I’ve got another question here: On the role of China in the global economy,
what kind of role do you see China playing in the recovery?

MS. GOPINATH:
China is one of the countries that went into lockdown first and reopened
first, and so they’ve had a longer period when they have been recovering,
that itself — better growth in China, would itself would be good for the
rest of the world. But, you know, there are many other things that China
could be involved in, we certainly need to ensure there’s enough medical
supplies around the world, and China has been playing an important role in
there. We also need to make sure that there are no escalating U.S. and
China trade tensions, and China play a very important role there.
Similarly, in terms of debt service relief already put out on the table. So
there are many things that can be done. Let me bring in Malhar, if he would
like to add anything.

MR. NABAR:
Just perhaps one brief observation that if we look at emerging Asia, and I
think this applies to China as well, the recovery that we’re seeing in part
reflects the importance of technology, the tech sector, which is more
amendable to the work from home aspects under which we’ve all been
operating over the past few months. China perhaps, China could use a key —
perhaps plays a key role in these global supply chains with technology. And
just to reinforce the point that Gita was mentioning, that to the extent
that grievances can be address on multiple fronts, including on technology,
this would really help with spurring the recovery and guaranteeing that the
global economy gets back on its feet soon.

MR. ANSPACH:
Here’s a follow-up question from colleagues at Today’s News Africa
, and they’re asking: whether we could be more specific about the
Sub-Saharan Africa, and how much has or will be lost in the region in the
12.5 trillion [dollars] that you mentioned.

MS. GOPINATH:
I don’t have the exact number in terms of the trillions that will be lost,
but I can tell you that our projection for Sub-Saharan Africa is — overall
is neagative-3.2 percent in 2020, with a recovery in 2021 of 3.4 percent.
So this is a downward revision, it is a significant downward revision, and
we have some very large negative growth forecast, for instance with South
Africa it’s minus-8 percent, for Nigeria it’s minus-5.4 growth. So these
economies are being hit very hard.

We should also keep in mind that it’s not just the reduction in the growth
rate, but for many countries that are starting out at lower per capita
income levels, when you have a growth hit, of even 3 or 4 percentage
points, even 5 percentage points, the distress that it causes to people’s
lives is an order of magnitude bigger than a similar decline for, say, an
advanced economy. So, these are very difficult times.

MR. ANSPACH:
I have two questions here on the U.K. and maybe we will end on those
questions. The question is from ITV News, how high do you expect
the level of unemployment to get in the U.K., and would the U.K. face an
unemployment crisis on the scale of the 1980s?”

MS. GOPINATH:
So in the case of the U.K., we have a significant downgrade from April. We
have growth projected at around minus-10 percent for 2020, and then only a
partial recovery of 6.3 percent in 2021. What that means is that even by
the end of 2021, the level of GDP in the U.K. will be lower than the
pre-crisis level, so this is a prolonged hit. And as we know, the sectors
that are getting hit in this crisis are the ones that employ low-skilled
workers, they also tend to be more labor intensive, and so the effect on
employment can be substantial. And maybe Gian Maria, would you like to come
in and add?

MR. MILESI-FERRETTI:
Yes. I mean, some of these calculations are really very difficult because
at the moment you have schemes like the job retention and self-employment
schemes that fundamentally retain a link between the worker and the firm,
and prevent unemployment from rising, even though others were — you know,
are dropping very sharply.

The issue will be what happens when these programs are wound down, how fast
they’re wound down and, you know, how fast the recovery is so as to be able
to absorb these workers back in proper employment.

A related issue is what is going to happen to labor force participation,
because as you know the unemployment, to be counted as unemployed, you have
to be actively looking for work. A lot of people, given the situation, have
dropped out of the labor force, and the strength of the recovery will be
one of the factors driving them back into the labor force.

So, the forecast is clearly for an increase in the unemployment rate, as
these schemes are wound down in October, where we have our full World
Economic Outlook, with more details set of projections on a variety of
economic variables, including unemployment, we will be more precise about
our forecast on that front.

MR. ANSPACH: Thanks, very much, Gian Maria. Thanks very much, Gita. Thanks
very much, Malhar. Thank you for joining us today. Let me just remind you
that tomorrow we’ll be launching the Global Financial Stability Report
Update. On Friday, our Managing Director will be participating in a number
of events. And then on Friday, we also have the Economic Outlook for Latin
America, and on Monday for Africa.

With that, thank you again. Stay safe and stay well. Thank you.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Raphael Anspach

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson