Global economy ‘less dire’ but long climb ahead amid COVID-19 crisis: IMF chief

>> THE GLOBAL economy is looking “less dire” than it did in June and the International Monetary Fund (IMF) will make a “small” upward revision to its 2020 global output forecast, IMF Managing Director Kristalina Georgieva said yesterday.

Georgieva, in remarks to a London School of Economics event, said, “My key message is this: The global economy is coming back from the depths of this crisis.” “But this calamity is far from over. All countries are now facing what I would call ‘the long ascent’ – a difficult climb that will be long, uneven and uncertain. And prone to setbacks,” she added in a speech billed as her “curtainraiser” for next week’s IMF and World Bank annual meetings.

The IMF in June forecast that coronavirus shutdowns would shrink global gross domestic product (GDP) by 4.9%, marking the sharpest contraction since the 1930s Great Depression, and called for more policy support from governments and central banks.

The IMF will publish its revised forecasts next week as member countries participate in annual meetings held largely in an online format.

Georgieva said the IMF was continuing to project a “partial and uneven” recovery in 2021. In June, the IMF forecast 2021 global growth at 5.4%.

But $12 trillion in fiscal support, coupled with unprecedented monetary easing, has allowed many advanced economies, including the United States and the eurozone, to escape the worst damage and start to recover, Georgieva said. China also has recovered faster than expected.

Emerging markets and low-income countries face a precarious situation with weak health systems, high external debt and dependency on sectors most exposed to the pandemic, such as tourism and commodities, as well as high external debt, she said.

“In low-income countries, the shocks are so profound that we face the risk of a ‘lost generation,’” Georgieva said, signaling that the IMF and World Bank will press hard for more debt relief for lowincome countries next week.

She called for more debt help quickly for low-income countries beyond a moratorium on official bilateral debt payment until the end of 2020. She said development gains could be reversed without access to more grants, concessional credit and debt relief.

“In some cases, global coordination to restructure sovereign debt will be necessary, with full participation of public and private creditors,” Georgieva added.

The IMF on Monday approved new emergency aid for 28 of the world’s poorest countries to help them alleviate their debt and better cope with the impact of the coronavirus pandemic.

The announcement, which follows a similar measure passed in mid-April for 25 countries, is intended to help the countries cover their debt repayments to the IMF for the next six months and “free up scarce financial resources for vital emergency medical and other relief efforts” during the pandemic.

The 28 countries receiving the second tranche of aid are Afghanistan, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Democratic Republic of Congo, Djibouti, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mozambique, Nepal, Niger, Rwanda, Sao Tome and Principe, Sierra Leone, the Solomon Islands, Tajikistan, Tanzania, Togo and Yemen.

Mali is also eligible for aid but has not yet been added to the list because “there is a lack of clarity as to whether the international community recognizes/deals with the current military regime as the government of Mali,” the IMF said.

The debt relief is channeled through the Catastrophe Containment and Relief Trust (CCRT), which enables the IMF to provide grants to the poorest and most vulnerable countries hit by a natural disaster or public health crisis.

Subject to sufficient resources in the CCRT, grants could be provided for a two-year period through mid-April 2022 for an estimated total amount of $959 million.

The IMF’s goal is to endow the CCRT with $1.4 billion so that it can also meet future needs. To date, $506.5 million has been contributed by several countries, including the United Kingdom, Japan, Germany, the Netherlands, Switzerland, Norway, China, Mexico, Sweden, Bulgaria, Luxembourg and Malta.