The global economies will plumb darker depths this year before any green shoots emerge, and even a partial recovery won’t set in until 2021.
“With the crisis still spreading, incoming economic data is worse than our already pessimistic projection,” Kristalina Georgieva, managing director of the International Monetary Fund, said Tuesday of the global coronavirus pandemic during the Financial Times’ Global Boardroom digital conference.
For now, the lack of a vaccine or established COVID-19 remains a significant challenge, as the World Health Organization’s May 12 situation report shows worldwide cases well beyond 4 million. That said, Georgieva noted that the global economy could be in far worse shape.
“What is absolutely necessary is to recognize the decisive actions that have stabilized the world economy through massive injection [by central banks of] $8.3 trillion. … We have also seen the central banks acting in a synchronized manner in an unprecedented fashion,” Georgieva said, adding that COVID-19 has birthed a “very dire environment.”
Those decisive actions help countries “build a bridge between now and then, when the economies restart,” she said, adding that the IMF will present new projections in June that will show “a bit more bad news in terms of how we see 2020.”
The IMF has doled out $1 billion in loans in record time to 50 countries, quadruple its previous average of $250 million in finance capacity, she added. Moreover, wealthier nations have stepped up to support members whose emerging economies are far weaker—and thus more vulnerable to disruption and chaos. This concerted, orchestrated effort will be instrumental in restoring confidence worldwide. The IMF’s most under-resourced member countries aren’t required to repay their loans for the next six months, a period that could be extended for up to two years, Georgievaadded.
For now, IMF member nations are waiting to see how the COVID-19 crisis evolves before determining what future role the fund can play as the “center of a global safety financial net,” Georgieva said.
Meanwhile, financial measures undertaken by the Federal Reserve in the U.S., the European Central Bank, the Bank of England and Bank of Japan together helped to “lift up the overall liquidity in the world,” she said.