The IMF boss advises to continue spending public money to stimulate the economy ravaged by the coronavirus crisis, which is entering a new phase.
The crisis caused by the pandemic has entered a new phase that will require flexibility to ensure “a sustainable and equitable recovery”, said Thursday the IMF Managing Director, warning that the world “is not yet out of the woods” ”
Speaking in a blog a few days before a virtual meeting of the G20, chaired by Saudi Arabia, Kristalina Georgieva has set aside her priorities: maintain, “even extend”, social protection measures, continue spending money public to stimulate the economy and take advantage of this “opportunity that only presents itself once a century” to rebuild a world “fairer, greener, more sustainable, more intelligent and above all more resilient”.
Although some positive signs are emerging, “we are not out of the woods yet. A second global wave of the disease could lead to further disruption in economic activity. Other risks include the distorted value of assets, the volatility of commodity prices, the rise of protectionism and political instability, ”warns Kristalina Georgieva.
But not wanting that Cassandre she also stressed “decisive advances in research on vaccines and treatments (which) could boost confidence and economic activity”. The economist recognizes, however, that “these alternative scenarios underline how exceptionally high the uncertainty remains”.
The big financiers of the G20 are meeting in a difficult context, the pandemic continuing to progress, according to the WHO.
In the United States, the world’s largest economy, new cases of contamination are still in the tens of thousands and the Covid-19 is also raging in South America. Conversely, Europe seems to have better contained the fire, as did China and even Japan.
Worse than expected
This “crisis like no other” is much more severe than expected and the recovery will be slower than expected, warned the Fund on June 24, by publishing the revision of its global economic forecasts. For 2020, the IMF predicts a global recession of 4.9%. This is much worse than the 3% expected in April, in the heart of the pandemic, when the Fund already stressed that it was the worst crisis since the Great Depression of the 1930s.
And for certain countries, particularly in Europe, the contraction in gross domestic product is staggering: -12.5% for France, -12.8% for Spain and Italy. In the United States, GDP is expected to collapse by 8% this year, well beyond the 5.9% decline estimated in April. For China, where the deadly virus started in late 2019, the Fund expects 1% growth, far from the 6.1% achieved last year.
In 2021, world GDP is expected to rebound by 5.4% if the IMF scenario is realized.