The IMF says the world’s economy was “less dire” than it expected, but that there is still work to be done to help growth return in “the long ascent” back from crisis, Managing Director Kristalina Georgieva said Tuesday in Washington, DC (Oct. 6).
In a virtual event hosted by London School of Economics to celebrate its 125th anniversary on Tuesday (oct.6) Kristalina Georgieva, Managing Director of the previewed the messages ahead of IMF’s annual meetings next week and announced that the virtual meetings will stress on the importance of building a world that is more inclusive and resilient post-pandemic.
She highlighted that the global economic activity took an unpresented fall in the second quarter of the year and that the downturn looks less bleak now.
“The IMF in June projected a global GDP contraction of 4.9 percent in 2020. We now estimate that the second-quarter downturn was somewhat less dire than expected, allowing for a small upward revision to our global forecast for 2020. And we continue to project a partial and uneven recovery in 2021.”
She said that the path ahead is still uncertain and that progress on vaccines and therapies could speed up the “ascent”, but it could also get worse if there is a significant increase in severe outbreaks. She also stressed that the risk to the global economy is still elevated.
“Risks remain high, including from rising bankruptcies and stretched valuations in financial markets. And many countries have become more vulnerable. Their debt levels have increased because of their fiscal response to the crisis and the heavy output and revenue losses. We estimate that global public debt will reach a record-high of about 100 percent of GDP in 2020.”
She also discussed how the path forward can be paved by confronting the crisis and pushing for transformations particularly through avoiding premature withdrawal of policy support.
“Where the pandemic persists, it is critical to maintain lifelines such as cash transfers and wage subsidies. Equally important is continued monetary accommodation and liquidity measures to ensure the flow of credit, especially to small and medium-sized firms—thus supporting jobs and financial stability. Pull the plug too soon, and the ‘Long Ascent’ becomes a precipitous fall.”
The floor was open to LSE students who asked MD Georgieva about the role IMF plays in incorporating policies that are targeted towards improving sustainability and climate action in its poorest countries.
“We work very hard to help countries put in place climate mitigation policies that combine. Investment in low carbon. Transformation, putting a price on carbon with predictability for what this price is going to be over time as an incentive to change.”
“some are still surprised to see us working on. Don't be surprised. The future has to be financially sound. But for that reason, it has to be environmentally and socially sustainable.”