Growth Forecast At -3%, As IMF Offers Debt Relief To Most Vulnerable Nations During Pandemic
Forecasting the "worst economic downturn since the Great Depression", the International Monetary Fund said on Tuesday that growth for the year was likely to end up at minus three percent, with a dramatic change evident since the last World Economic Outlook report in January.
Gita Gopinath, Economic Counsellor and Director of the IMF’s Research Department, said in a blog post that following the global lockdown in response to the coronavirus, "the magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes."
Many countries now face multiple crises - over health, finances, and a collapse in commodity prices - which interact in complex ways. "Policymakers are providing unprecedented support to households, firms, and financial markets, and, while this is crucial for a strong recovery, there is considerable uncertainty about what the economic landscape will look like when we emerge from this lockdown," the IMF chief economist wrote.
Under the assumption that the pandemic and required containment, peaks in the second quarter for most countries, and recedes in the second half of the year, the IMF April World Economic Outlook projects global growth in 2020 to fall to minus three percent. "This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis," said Gopinath.
But, there was also some room for optimism for next year, assuming COVID-19 fades and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, with projected global growth in 2021 to rebound to 5.8 percent.
"This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around US$9 trillion, greater than the economies of Japan and Germany, combined," the IMF economic counsellor wrote.
The IMF said on Monday it was extending immediate debt service relief to its 25 poorest and most vulnerable member countries - in Africa, Asia, the Middle East and the Caribbean - to help them address the crippling economic effects of the COVID-19 pandemic.
The action, approved by the IMF’s Executive Board on Monday, is being taken under its revamped Catastrophe Containment and Relief Trust measures, which can provide about $500 million in grant-based relief to countries in emergency need.
"This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months," said IMF Managing Director Kristalina Georgieva, adding that the grants will help vulnerable nations to channel more of their scarce financial resources towards vital emergency medical and other relief efforts.
The 25 countries are Afghanistan, Benin, Burkina Faso, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, Sao Tome and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo and Yemen.
