As the unprecedented coronavirus pandemic has led to a majority of countries under lockdown, the head of the International Monetary Fund (IMF) Kristalina Georgieva reportedly said that it could take until 2023 for the global economy to return to its pre-COVID-19 levels. While speaking to an international media outlet, Georgieva said that the ‘most severe shock’ has already occurred as 170 countries have entered negative economic growth since March. She also expects that global economy to shrink further beyond the current IMF estimate of negative three per cent GPD in 2020 before a ‘partial recovery’ in 2021.
While reportedly calling it an ‘economic rapture’, Georgieva gave an old IMF advice to adopt the posture of global social justice warrior. The ‘struggling and bankrupt’ government have long-dreaded IMF conditions on lending, including strict limits on government outlays and privatising assets. However, Georgieva urged global leaders to ‘spend wisely’. Furthermore, the IMF also reportedly attached ‘green conditions’ to its financial assistance, meanwhile, Georgieva also reportedly said that the world is richer when women are equal.
Last month, IMF chief economist Gita Gopinath also said that the deadly outbreak is pushing the global economy to its ‘deepest recession’. Gopinath warned that the pandemic has already cut world output by three per cent this year and it could get worse. She also informed that the downturn will slash $9 trillion from the world economy. Further, the IMF also warned that there are ‘severe risks of a worse outcome’ due to the ‘extreme uncertainty around the strength of the recovery.
The IMF reportedly said that the severe slowdown is ‘unavoidable’, however, they added that substantial targeted fiscal, monetary and financial measure can soften the blow. Gopinath also said that once the recovery happens and the world is past the pandemic phase for advanced economies, it would be essential to undertake a broad-based final stimulus. She added that the spending would be more effective if it were coordinated across all the advanced economies of the world.
It is believed that synchronised actions can magnify the impact but also can avoid some the errors of the past century when countries adopted ‘futile mercantilist policies’. The organisation has predicted that the inevitable massive spending will lead to a sharp increase in government debt and deficit levels. However, Gopinath reportedly said that if the recovery begins in 2021 and with low-interest rates, the combination should help in bringing down debt levels slowly over time.