By Audrey Lotechukwu, theG&BJournal
TUE, APRIL 14 2020-theG&BJournal- In making the dire prediction, the International Monetary Fund (IMF) said the risks for even more severe outcomes are substantial, much worse than during the 2008–09 financial crisis.
‘’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,’’ Gita Gopinath, the Economic Counsellor and Director of the Research Department at the IMF said.
According to Gopinath, for this year, growth in advanced economies is projected at -6.1 percent. Emerging market and developing economies with normal growth levels well above advanced economies are also projected to have negative growth rates of -1.0 percent in 2020, and -2.2 percent if you exclude China. Income per capita is projected to shrink for over 170 countries. Both advanced economies and emerging market and developing economies are expected to partially recover in 2021.’’
‘’Policymakers must also plan for the recovery. As containment measures come off, policies should shift swiftly to supporting demand, incentivizing firm hiring, and repairing balance sheets in the private and public sector to aid the recovery. Fiscal stimulus that is coordinated across countries with fiscal space will magnify the benefit for all economies. Moratoria on debt repayments and debt restructuring may need to be continued during the recovery phase.’’
The IMF reiterated the need to scale up fiscal measures were stoppages to economic activity are persistent, or the pickup in activity as restrictions are lifted is too weak.
‘’Broad-based fiscal stimulus can preempt a steeper decline in confidence, lift aggregate demand, and avert an even deeper downturn,’’ it said.
According to the Fund, the actions of large central banks, synchronised, can magnify their impact on individual economies and will also help generate the space for emerging market and developing economies to use monetary policy to respond to domestic cyclical conditions.
‘’Supervisors should also encourage banks to renegotiate loans to distressed households and firms while maintaining a transparent assessment of credit risk’.’’
According to the IMF, strong multilateral cooperation is essential to overcome the effects of the pandemic, including to help financially constrained countries facing twin health and funding shocks, and for channeling aid to countries with weak health care systems. Countries urgently need to work together to slow the spread of the virus and to develop a vaccine and therapies to counter the disease.
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