IMF chief economist sees slow recovery

WASHINGTON — The global economic recovery is going to be slow as long as the COVID- 19 pandemic is not under control, Gita Gopinath, chief economist of the International Monetary Fund, has said, calling for a multilateral effort to contain the virus.

In a video interview last week, Gopinath said economic outcomes from April to June had been less dire than earlier feared, and the global recovery is expected to have been strong in the three months to September. However, momentum could slow after that.

“We are still living with the pandemic in many parts of the world,” Gopinath said. “That is going to slow the recovery because especially contact- intensive services sectors will not recover fully as long as the pandemic is not under control.”

The IMF forecast in its latest World Economic Outlook that the global economy will contract by 4.4 percent this year, 0.8 percentage point above the forecast in June. Despite the upward revision, Gopinath said the ascent out of the crisis is likely to be “long, uneven and highly uncertain”.

Tremendous uncertainty about the global economic outlook persists, according to the report, which highlighted downside risks such as the resurgence of the virus and growing restrictions on trade and investment.

“We are very concerned about possible second waves,” Gopinath said. “And if indeed there is a serious second wave, which leads to much more widespread containment measures and lockdown, then that certainly will be a big downside risk to our forecast.”

Trade tensions are also a serious concern, Gopinath said, noting that this was an issue even before the pandemic.

The report showed that global trade is on track to shrink 10.4 percent this year, followed by an 8.3- percent rebound next year. This seems to be in line with weakened global demand, Gopinath said, adding that trade restrictions so far have not been an important factor in the contraction of global trade.

Despite that, Gopinath flagged trade tensions as one of the big downside risks. “You could have worsening trade tensions and investment tensions and technology tensions, and that can certainly be a hit to the global recovery.

“Countries have to be very careful not to turn protectionist and to work closely with other countries.”

It is also important to reform the global trading system, and much work is needed to modernize the multilateral- rules- based World Trade Organization, she said.

The World Economic Outlook report forecast China’s economy to grow 1.9 percent this year, 0.9 percentage point above the IMF’s forecast in June, making it the only major economy that will grow this year.

The upward revision for China resulted in part from a better- thanprojected performance in exports, Gopinath said.

“The demand for medical equipment and for office equipment to work from home, that’s been high. And China’s exports have gone up because of that.”

A second factor, she said, was the strong stimulus from public investment in infrastructure. “That also surprised on the upside.”

However, the recovery in China, like many other economies, is “somewhat unbalanced”, she said, with a slower recovery in consumption than public investment and some other sectors.

We are still living with the pandemic in many parts of the world. That is going to slow the recovery.”

Gita Gopinath, chief economist of the IMF