World economy faces long and difficult exit from pandemic, says IMF chief

WASHINGTON (Reuters) – The global economy is in “less dire” shape than it was in June, but risks collapsing again if governments end fiscal and monetary support too soon, fail to fail to control the coronavirus and ignore emerging market debt problems, the International Monetary Fund has said. said director Kristalina Georgieva on Tuesday.

FILE PHOTO: International Monetary Fund (IMF) Managing Director Kristalina Georgieva makes a remark during an International Monetary Finance Committee (IMFC) closing press conference at the 2019 Annual Meetings of Finance Ministers and bank governors of the IMF and the World Bank, in Washington, U.S., October 19, 2019. REUTERS/Mike Theiler/File Photo

Georgieva told a London School of Economics online event that the IMF will revise its global economic output forecast slightly upwards next week, adding: “My key message is this: the world economy is coming back from the depths of this crisis.”

“But this calamity is far from over. All countries now face what I would call “the long climb” – a difficult climb that will be long, uneven and uncertain. And prone to setbacks,” she added in a speech billed as her “curtain raiser” for the annual meetings of the IMF and World Bank next week.

In June, the Fund forecast that coronavirus-related shutdowns would reduce global gross domestic product by 4.9%, marking the biggest contraction since the Great Depression of the 1930s, and called for more policy support from governments. governments and central banks.

The IMF will release its revised forecasts next week as member countries take part in the meetings, which will be held largely in an online format.

Georgieva said the IMF continued to forecast a “partial and uneven” recovery in 2021. In June, it predicted global growth of 5.4% for 2021.

But $12 trillion in fiscal support, coupled with unprecedented monetary easing, has allowed many advanced economies, including the United States and the eurozone, to escape the worst damage of the pandemic, and some sectors of activity were found to work best in the middle, Georgieva said. China has also recovered faster than expected.

This had a positive impact on emerging markets, but Georgieva urged countries to maintain support for their economies, warning that global growth would remain subdued over the medium term and the risk of “serious economic scarring” was high.

“We are very clear in the message we communicate not to withdraw support prematurely,” Georgieva said. “If we do, we risk massive bankruptcies and massive unemployment.”

“LOST GENERATION”

Emerging markets and low-income countries face a precarious situation with weak health systems, high external debt and dependence on sectors most exposed to the pandemic such as tourism and commodities , she said.

“In low-income countries, the shocks are so deep that we face the risk of a ‘lost generation,'” Georgieva said, noting that the IMF and World Bank will press for more debt relief. debt of low-income countries next week.

She called for a rapid increase in debt relief for low-income countries beyond a moratorium on official bilateral debt payments until the end of 2020. She said gains from development could be reversed without access to more grants, concessional credit and debt relief.

“In some cases, global coordination to restructure sovereign debt will be required, with the full participation of public and private creditors,” Georgieva added.

Georgieva also urged heavily indebted countries not to wait to seek debt restructuring and said tax reform was needed to raise the needed revenue.

The IMF Executive Board on Monday approved relief from debt payments to the Fund for 28 countries for another six months, until April 13, 2021. The decision transfers these payments to a special disaster relief fund provided by the richest member countries.

Reporting by David Lawder, additional reporting by Rodrigo Campos and Andrea Shalal; Editing by Chizu Nomiyama and Paul Simao

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