In these grave times when a large number of countries are under complete lockdown, an economic slowdown was one of the most obvious consequences which were expected due to the stopping and slowing down of manufacturing and production activities. This sudden halt of market activities has greatly impacted the global economy, but to what extent?
This question was answered by the IMF Chief Kritalina Georgieva at a news conference. “We have reassessed the prospects for growth for 2020 and 2021. It is now clear that we have entered a recession as bad or worse than in 2009. We do project recovery in 2021,” IMF Managing Director Kristalina Georgieva told reporters at a news conference.
Major Recession Ahead
189-nation lending agency was forecasting a recovery in 2021, saying it could be a “sizable rebound.” But she said this would only occur if nations succeed in containing the coronavirus and limiting the economic damage.
“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 erode the fabric of our societies,” she further told reporters. She also stated that the IMF was working on its “economic outlook” and that this revised plan would be released in the coming weeks which allowed agencies enough time to assess the economic damages in the wake of this pandemic.
One of the reporters asked if the United States was also in recession, to which she responded,” that Federal Reserve Chairman Jerome Powell had earlier stated that America may well be in a recession.” She also mentioned that other advanced economies, as well as developing countries, had started facing economic slowdowns.
The Chief said that lower-income countries were hit the hardest and now almost 81 countries were seeking help from the IMF Emergency Financing Program for aid. “We do know that their own reserves and domestic resources will not be sufficient,” Georgieva said. She announced that Krygyzstan would be the first country to receive the IMF support package of $120.4 million to aid the country through the crisis. She further pledged that the IMF would provide $1 trillion of all its lending resources to the aggrieved countries. She also mentioned that member countries were asking the IMF to “ do more, faster and better”
In order to meet the increased demand, the IMF would double the emergency financing program as well as simplify the procedures to receive this aid. It would also work towards providing more debt relief to the poorest countries hit by the COVID-19. She also mentioned that she planned on discussing the growing issues with the IMF’s Executive Board in order to put together a reform package to be presented in April. It was also observed that the US package accelerated the $78 billion contributions to IMF’s lending capacity. “The U.S. decision to speed up approval of its substantial new contributions to the IMF is a powerful message to the international community and helps solidify the IMF’s (overall) US$1 trillion lending capacity,” Georgieva said in a statement after the House of Representatives approved the massive rescue package.
Understanding the major hit that the international economy has taken and the further downfall to be expected plays a key role in determining the reforms to be introduced by the IMF in order to bring some relief to the Corona- hit countries. A worldwide recession should be expected by all economic and production sectors. It may take a while to recover from the consequences of this virus.