The International Monetary Fund (IMF) finally confirmed what banks and economists have been predicting for the past month -- the world will plunge into a recession this year due to the raging COVID-19 pandemic but said this one will be worse than the Great Recession of 2008. The IMF, however, predicted a quick recovery in 2021 providing COVID-19 can be quickly tamed.
IMF managing director Kristalina Georgieva admitted the outlook for global growth is negative. She said the IMF now expects "a recession at least as bad as during the global financial crisis or worse."
Earlier this month, Georgieva warned 2020 world growth will come in below the 2.9% rate seen in 2019 but stopped short of predicting a recession. Trade wars launched by President Donald Trump crashed global growth in 2019 to the lowest rate since a 0.7% contraction in 2009.
Despite the grim projections, Georgieva said an economic recovery could be expected in 2021, but for this recovery to materialize, countries need to prioritize containing COVID-19 and strengthening their health systems, both of which are easier said than done.
"The economic impact (from COVID-19) is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be," she said.
Georgieva revealed the IMF will massively boost emergency finance. She said 80 countries have already requested financial assistance, adding the IMF is ready to deploy all of its $1 trillion in lending capacity.
She said advanced economies are generally in better shape to deal with the coronavirus crisis. On the other hand, many emerging markets and low-income countries face massive challenges, including unprecedented capital flight. Investors have already taken $83 billion from emerging markets since the start of the coronavirus crisis, the largest capital outflow ever recorded, said Georgieva.
She said the IMF is especially concerned about low-income countries in debt distress and is working closely with them to address this debilitating problem. She again called on members to contribute funds to replenish its Catastrophe Containment and Relief Trust that helps the poorest countries.
UN secretary-general Antonio Guterres on Monday said the UN wants $2 billion to help poor countries combat the coronavirus. He also warned that a massive, coordinated package is needed to deal with the pandemic's social and economic impact around the world.
"The package needs to make households be afloat, make businesses be afloat, keep societies being afloat," said Guterres at a virtual news conference.
"This will require a double-digit of GDP [gross domestic product] support in the developed world and creating the conditions through the IMF, through the swaps among central banks, through the creation of new facilities."
He also called for a global ceasefire so the world can focus on fighting the coronavirus pandemic.
"It is time to put armed conflict on lockdown and focus together on the true fight of our lives," said Guterres.
