By Adedapo Adesanya
The International Monetary Fund (IMF) has warned that the global economy will likely suffer a severe recession worse than that of the 2008 global financial crisis in 2020.
During a phone call of G20 finance ministers and central bank governors on Monday, Managing Director of the IMF, Mrs Kristalina Georgieva, said this recession would be caused by the coronavirus pandemic.
She said the global economy will feel the impact heavily but stated that world economic output should recover in 2021 due to efforts by central banks to ease monetary policy.
“First, the outlook for global growth: for 2020 it is negative—a recession at least as bad as during the global financial crisis or worse. But we expect a recovery in 2021,” she said.
“To get there, it is paramount to prioritize containment and strengthen health systems—everywhere. The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.
“Advanced economies are generally in a better position to respond to the crisis,” she added.
Mrs Georgieva warned that many emerging markets and low-income countries face significant challenges as there are already capital outflows from poorer nations.
The IMF chief stated that investors have already removed $83 billion from emerging markets since the start of the crisis, the largest capital outflow ever recorded.
The global lender said it will step up aid to countries in need and called on central banks to create additional swap lines, to prevent a liquidity crisis in emerging markets and poorer nations.
Mrs Georgieva then added that IMF is particularly concerned about low-income countries in debt distress and was working closely with them to address those concerns.
She further said the IMF was exploring other options with its members. Several low and middle-income countries have asked for an allocation for the Special Drawing Right, an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves, as was done during the global financial crisis.
So far, there have been 384,432 cases of the COVID-19 with 16,591 deaths recorded in over 195 countries.
Modupe Gbadeyanka