World faces worst crisis since Great Depression: IMF chief

WASHINGTON: The global coronavirus pandemic has inflicted an economic crisis unlike any in the past century and will require a massive response to ensure recovery, said IMF chief Kristalina Georgieva.

The International Monetary Fund expects global growth will turn sharply negative in 2020, with 170 countries experiencing a decline in per capita income, Georgieva said.

She said the world should brace for “the worst economic fallout since the Great Depression” as warnings about the damage inflicted by the virus already were stark and much of the global economy has been shut down to contain the spread of the virus.

Just a few months ago, the fund was expecting 160 countries to see rising per capita income, she said in a speech previewing next week’s spring meetings of the IMF and World Bank, which will be held virtually due to coronavirus restrictions.

Even in the best-case scenario, the IMF expects only a “partial recovery” next year, assuming the virus fades later in 2020, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted.

There is “tremendous uncertainty around the outlook” and the duration of the pandemic, Georgieva said. The IMF will release its latest World Economic Outlook next week, with grim forecasts for its members this year and next. In January, the IMF projected global growth of 3.3 percent this year and 3.4 percent in 2021.

The US economy has purged 17 million jobs since mid-March, with the latest weekly data issued Thursday showing 6.6 million workers filed for unemployment benefits, and economists projecting a double-digit jobless rate this month.

The World Bank said the pandemic might cause the first recession in Africa in 25 years. The Institute for International Finance (IIF), a global banking association, expects a 2.8 percent plunge in global GDP, compared to a decline of 2.1 percent in 2009 during the global financial crisis.

That is a sharp reversal from October, when the IIF predicted 2.6 percent growth. Georgieva said that recovery depends on decisive actions now. The IMF has $1 trillion in lending capacity and is responding to unprecedented calls from 90 countries for emergency financing.

Many countries already have taken steps worth a combined $8 trillion but Georgieva urged governments to do more. “Lifelines for households and businesses are imperative” to “avoid scarring of the economy that would make the recovery so much more difficult.”

The IMF board approved a doubling of emergency lending facilities that will provide about $100 billion, and is moving ahead with debt relief for the poorest countries and also help for countries with unsustainable debt levels.

“The bleak outlook applies to advanced and developing economies alike. This crisis knows no boundaries. Everybody hurts,” Georgieva said. She noted that about $100 billion in investments already had fled emerging markets, more than three times the capital exodus seen in the 2008 global financial crisis.