COVID-19: Global economy will contract by 3 per cent ― IMF

The ongoing COVID-19 pandemic will shrink the global economy by 3 per cent, the International Monetary Fund (IMF) has said.

The global financial institution then called on governments to rise to the aid of affected households and businesses to weather the crisis.

The Bretton Wood institution said on Tuesday, during the presentation of the April 2020 World Economic Outlook as part of the virtual IMF/World Bank spring meetings, that “As a result of the pandemic, the global economy is projected to contract sharply by –3 per cent in 2020, much worse than during the 2008–09 financial crisis.”

IMF added that “The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.”

The outlook presented by Gita Gopinath, IMF’s Chief Economist, however, stated that “the global economy is projected to grow by 5.8 per cent in 2021 as economic activity normalises, helped by policy support” if the pandemic should end in the second half of 2020 after which containment efforts would gradually unwind.

It, however, warned of a grave situation should the global lockdown be extended beyond the second half of the year.

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On how to minimise the impact of the pandemic, IMF said, “Effective policies are essential to forestall worse outcomes. Necessary measures to reduce contagion and protect lives will take a short-term toll on economic activity but should also be seen as an important investment in long-term human and economic health. The immediate priority is to contain the fallout from the COVID-19 outbreak, especially by increasing health care expenditures to strengthen the capacity and resources of the health care sector while adopting measures that reduce contagion.

“Economic policies will also need to cushion the impact of the decline in activity on people, firms, and the financial system; reduce persistent scarring effects from the unavoidable severe slowdown, and ensure that the economic recovery can begin quickly once the pandemic fades. Because the economic fallout reflects particularly acute shocks in specific sectors, policymakers will need to implement substantial targeted fiscal, monetary, and financial market measures to support affected households and businesses. Such actions will help maintain economic relationships throughout the shutdown and are essential to enable activity to gradually normalise once the pandemic abates and containment measures are lifted.”

IMF noted that the economic landscape would be altered significantly beyond the duration of the crisis with government and central banks going beyond their normal roles in managing the economy.

It noted that “Advanced economies with strong governance capacity, well-equipped health care systems, and the privilege of issuing reserve currencies are relatively better placed to weather this crisis. But several emerging market and developing economies without similar assets and confronting simultaneous health, economic, and financial crises will need help from advanced economy bilateral creditors and international financial institutions.”

NIGERIAN TRIBUNE