The International Monetary Fund is encouraging governments to continue monetary and fiscal stimulus to blunt the worst economic effects of the COVID-19 pandemic - or face the consequences.
It says unrelenting government monetary incentives to assist individuals and businesses affected by the COVID-19 economic slowing can stave off even greater damage and lay foundations for economic recovery.
The fund said $12 trillion in stimulus has been spent worldwide - with most coming from rich economies. On the other hand, poor countries and other emerging economies face greater future economic peril as a result of their limited financial resources, the fund said.
The poor are becoming poorer, the fund said. It predicts more than 90 million individuals will fall into extreme poverty this year owing to the pandemic.
Fund managing director Kristalina Georgieva said governments must not withdraw stimulus prematurely and must stay focused on their health care responses to the pandemic.
"If we cut these lifelines that have been extended to families and businesses before we are out of the health crisis, this could be catastrophic in terms of bankruptcies, unemployment and undoing all that has been done so far," she said.
Georgieva said the story "is less dire than we thought three months ago, but dire nonetheless."
The path beyond the pandemic remains uncertain as a result of slow progress in the development of vaccines, she says. Public health experts say vaccines are the only sure way to leave the pandemic behind.
U.S. drug companies Eli Lilly and Johnson & Johnson temporarily suspended clinical trials of an antibody treatment and vaccine late Tuesday over safety concerns.
Georgieva said Tuesday at the start of the annual meetings of the fund and the World Bank that ballooning public debt from government stimulus was a concern but the cost of withholding stimulus would be worse.
The fund now expects world gross domestic product will shrink 4.4% in 2020 compared with the 5.2% contraction it predicted in June.
"The world is coming back from the depths of its collapse in the peak of this crisis, which was the first half of this year. Employment levels have partially rebounded after having plummeted to historic lows. That said, this crisis is far from over," according to the fund's chief economist Gita Gopinath.
Gopinath said employment remained well below pre-pandemic levels. Low-skilled workers, youth and women are suffering the most.