The chief economist at the International Monetary Fund, or IMF, has warned that countries can expect more waves of economic turmoil as the novel coronavirus continues to hold the world in its grip.
The initial World Economic Outlook report, published on April 14, predicted a gross global GDP reduction of 3 percent this year, but even that worrying prospect was based on the novel coronavirus pandemic ebbing away in the second half of this year, which now seems unlikely.
The IMF’s initial forecast three weeks ago was that developing nations would need $2.5 trillion of external financing, but already that figure has been declared out of date by IMF Chief Economist Gita Gopinath.
“This crisis is likely to last longer, and so the needs will go up, even above that number,” she said, adding: “We know this crisis isn’t going away anytime soon …. things can get worse. The health crisis has not been solved.”
IMF Managing Director Kristalina Georgieva reinforced this bleak message, saying that the unpredictability of the virus means people must brace themselves for even more testing economic conditions.
More adverse scenarios
“Incoming economic data for many countries is below our already pessimistic assessment for 2020,” she said in a webinar hosted by the European University Institute.
“With no immediate medical solutions, more adverse scenarios might, unfortunately, materialize for some economies. It’s the unknown about the behavior of the virus that is clouding the horizon for projections.”
The IMF has already received requests for emergency funding from 103 countries, she said, and given help to 50 of them, as poorer countries are more economically vulnerable, even if their reported mortality rates were lower than in more developed nations.
IMF spokesman Gerry Rice said that as of May 6, $18 billion had been distributed, with the organization working “at an unprecedented speed, in an unprecedented way to meet this unprecedented challenge which we are all facing”.
The shutdown of the United States economy, the world’s largest, has led to widespread layoffs and a warning unemployment could reach 20 percent this month.
Georgieva said countries retreating into protectionist economic policies would be the exact opposite of what the global economy and global health needed at this time.
“It is hugely important for us to resist what may be a natural tendency to retreat behind our borders,” she said.
World trade needed to be rekindled, she said. “Otherwise, costs go up, incomes down, and we will be in a less secure world.”