IMF chief says growth forecast cuts ‘very likely’ as coronavirus hits economies hard

WASHINGTON - International Monetary Fund Managing Director Kristalina Georgieva said on Tuesday it was “very likely” the Fund would cut global growth forecasts further as the coronavirus pandemic was hitting many economies harder than previously projected.

“Incoming data from many countries is worse than our already pessimistic projections,” Georgieva said during a webcast conference sponsored by the Financial Times.

“Very likely we are going to come up with the update to our projections some time in June, and at that point ... our expectation is that there would be a bit more bad news in terms of how we see 2020.”

The IMF forecast a month ago that business closures and lockdowns to slow the spread of the virus would throw the world into the deepest recession since the 1930s Great Depression, with gross domestic product output shrinking three percent in 2020.

Under the IMF’s baseline scenario, which called for effects of the pandemic to fade in the second half of the year, it predicted growth would rebound to 5.8 percent in 2021. But the Fund also said at the time its forecast was precarious and depended on incoming data.

The United States lost 20.5 million jobs in April with the unemployment rate at 14.7 percent, and some U.S. officials have said that May jobs data could be worse.

The IMF typically revises its World Economic Outlook forecasts in early July. Georgieva said the worsening data was also likely to mean that emerging markets and developing economies would need more than $2.5 trillion in additional financing to grapple with the pandemic.

The IMF’s previous estimate of that amount - from both internal country resources and external financing - was “on the lower end,” she said.

Georgieva expected that number to be revised upward when the IMF released its new global economic forecasts.

A month after the IMF and World Bank Spring Meetings, Georgieva said IMF members still lacked agreement over an issue of new IMF Special Drawing Rights, a step last taken in 2009 that would provide hundreds of billions of dollars in new liquidity for all IMF members, rich and poor.

But members would continue to review liquidity needs and IMF resources, she said.

“During our spring meetings, it was very clear the membership said, ‘Everything is on the table. Let’s see how this crisis evolves in the future.’”

OSLO - Norway plans to draw a record 382 billion kroner (R685 billion) from its wealth fund, forcing the world’s biggest sovereign investor to embark on an historic asset sale to generate cash.

The unprecedented withdrawal, revealed in Norway’s revised budget for 2020, is more than four times the previous record set in 2016.

The development exposes the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.

For the first time, Norway’s government is set to withdraw considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments.

That income is assumed in the budget to be 258 billion kroner this year, meaning asset sales could reach 124 billion kroner, or around R222 billion. “It’s obviously an historic event,” SEB Chief Strategist Erica Dalsto said. “But we’re also in a crisis that lacks historical parallels. This illustrates the double-whammy that’s hit the Norwegian economy, with repercussions from both containment measures and the oil-price collapse.”