Washington, March 27: With the world moving towards a complete shutdown amid the coronavirus pandemic, the Managing Director of the International Monetary Fund Kristalina Georgieva on Friday said that 'it is now clear that we (global community) have entered a recession – as bad as or worse than in 2009.' Although she projected a rebound in 2021, she was of the opinion that this is only possible if COVID-19 virus is contained and liquidity problems from becoming a solvency issue can be prevented.
Addressing the governing body of the IMF — the International Monetary and Financial Committee (IMFC), containing 189 member countries — Georgieva said, "It is now clear that we have entered a recession – as bad as or worse than in 2009. We do project recovery in 2021 – in fact there may be a sizeable rebound, but only if we succeed with containing the virus – everywhere - and prevent liquidity problems from becoming a solvency issue. A key concern about a long-lasting impact of the sudden stop of the world economy is the risk of a wave of bankruptcies and layoffs that not only can undermine the recovery but can erode the fabric of our societies." IMF, World Bank Call for Suspending Debt Payments by Poorest Nations to Battle Coronavirus Pandemic.
Here's the tweet by IMF:
.@KGeorgieva: It is now clear that we have entered a recession. We project a rebound in 2021, but only if we contain the virus and prevent liquidity problems from becoming a solvency issue. https://t.co/dg8FHiuftW #COVID19 pic.twitter.com/BIbFaRB48u
— IMF (@IMFNews) March 27, 2020
Applauding the G20's fiscal measures totaling some five trillion dollars or over 6 percent of global GDP, Georgieva said that IMF has launched a policy actions tracker for 186 countries to help us all to see who is doing what. She added that IMF will keep updating the information regularly. The IMF director even mentioned that that have seen an extraordinary spike in requests for IMF emergency financing, she added that thay are doing what is necessary.
However, Georgieva claimed that many of the emerging markets will experience a contraction due to the shut-down of economies and a price shock. She said, "Many of these emerging markets will experience a contraction as necessary containment measures take their toll, and are shocked by reduced global demand for their exports – tourism, commodities, and manufactured goods – that provide critical streams of foreign exchange. Our current estimate for the finance needs of emerging markets is USD 2.5 trillion – a lower- end estimate for which their own reserves and domestic resources would not be sufficient." World Bank Announces Up to USD 12 Billion as Emergency Aid to Countries Coping with Coronavirus.
Apart from this, the IMF chief said that IMFC is proposing to double the emergency financing capacity, reviewing lending instruments to check what might be missing in the context of this crisis and seeking support from membership to increase the capacity of the Catastrophe Containment and Relief Trust (CCRT). She mentioned it clearly that IMF members need urgently to secure the borrowing capacity of the Fund through the NABs (New Arrangements to Borrow) and bilateral borrowing arrangements.