IMF MD says as we enter the next phase of the crisis, further policy action will be required, as well as increased international cooperation. The G20 Action Plan is key to this effort.
Washington – July 18, 2020: The global economy faces a deep recession this year, with partial and uneven recovery expected in 2021 due to the continued impact of COVID, the International Monetary Fund (IMF) has warned.
IMF, therefore, has called upon the nations to use the on-going COVID-triggered crisis as an opportunity to build a better future for all people by maximizing the potential of the digital economy, promoting green investment to combat climate change in a job-rich manner and investing in human capital to build a more inclusive economy.
In a statement of at the end of the virtual meeting of G20 Finance Ministers and Central Bank Governors, IMF Managing Director Kristalina Georgieva pointed out that due to the continuing impact of the COVID-19 pandemic, the global economy faces a deep recession this year, with partial and uneven recovery expected in 2021.
“While there remains great uncertainty on the outlook, the unprecedented actions taken by the G20 countries and others have helped to avert a much worse outcome. As we enter the next phase of the crisis, further policy action will be required, as well as increased international cooperation. The G20 Action Plan is key to this effort,” she said.
Georgieva suggested a four point action plan to support countries in fighting the crisis and to prevent long-lasting scarring of the global economy—particularly waves of bankruptcies, risks to financial stability, high unemployment, and increasing inequality.
First, the public health response remains the main priority to protect people, jobs, and economic activity. Across the world, countries have implemented exceptional measures to support individuals and workers. These lifelines should be maintained as needed and, in some cases, expanded.
Second, supportive fiscal and monetary policies will need to continue until we can secure a safe and durable exit from the crisis. Premature withdrawal of this support could derail the recovery and incur larger costs.
Third, policies need to prepare for and support transformational change, as some sectors may permanently shrink, while others—such as digital services—will expand. Adapting to change in an inclusive manner will require adequate social protection, and training and job search assistance to workers.
Fourth, we need to unite to help the poorest and most vulnerable economies, especially those struggling with high debt or dependent on hard-hit sectors. The G20’s Debt Service Suspension Initiative (DSSI) has been commendable and I hope that consideration will be given to extending it. In addition, to make it even more effective, greater private sector participation, and greater debt transparency, should be strongly promoted. Beyond the DSSI, there is a need to fill gaps in the international debt architecture and think about more comprehensive debt relief for many countries. We stand ready to support these efforts.
“I also emphasized that we can use the crisis as an opportunity to build a better future for all people by: maximizing the potential of the digital economy; promoting green investment to combat climate change in a job-rich manner; and investing in human capital to build a more inclusive economy,” she said
Georgieva pointed out that the IMF has moved with unprecedented speed—providing emergency financing to 72 countries in four months—and we will continue to support our member countries relentlessly. “We see especially pressing needs to assist low-income countries, and small and fragile states which have been hit very hard—with the support of our membership, we continue to mobilize additional concessional resources to help them. In this context, we are stepping up action to make better use of existing Special Drawing Rights (SDRs),” she said.
The IMF will explore additional tools that could further help in this crisis that is like no other and play our role at the centre of the global financial safety net in this time of unprecedented need for our member countries, she added.