In an exclusive interview with CNN’s Christiane Amanpour, IMF Managing Director Kristalina Georgieva warned that the global recession will be worse, and the economic recovery slower, than was anticipated. Georgieva explained that initial predictions had been based on hopes that the pandemic would recede, but with growing coronavirus cases across the world, she advised that economies must adapt. The recovery IMF foresees now is one that will coexist with the pandemic.
The IMF chief praised social distancing and mask-wearing saying they were micro measures that allow restart of economic activities, but cautioned that the best practice is to remain flexible until a vaccine is found, “Be very agile in your policies as we are still waiting for the decisive component, vaccines and/or treatment, to be in place,” she said.
“The headline of our assessment is that the recession is deeper in 2020 than we projected in April. The recovery is going to be slower in 2021 than we projected in April. But the actions governments have taken have put a floor under the world economy and are preventing a massive wave of bankruptcies or unemployment.”
On the IMF’s latest global assessment
The headline of our assessment is that the recession is deeper in 2020 than we projected in April. The recovery is going to be slower in 2021 than we projected in April. But the actions governments have taken have put a floor under the world economy and are preventing a massive wave of bankruptcies or unemployment. What we are seeing is that both advanced economies and emerging market economies are faring worse in this assessment if you take out especially China that was first on the curve of the pandemic, and, therefore, what we are saying is, we are not yet out of the woods. We have to concentrate on supportive measures for longer, and we need to think of a recovery that is going to bring forward our world, not slide it backwards.”
On the continuing growth of the pandemic
The recovery, we foresee now is one that will coexist with the pandemic. Back in April, we were still hoping that somehow the epidemic would recede, and we can see a V-shape recovery, but this is clearly is not happening. Not only is the pandemic still with us, but its course continues. The epicentre now moved to Latin America, we are quite worried about parts of South Asia, and we do not yet know whether Africa will also follow this speed-up of infections.
On protecting the future economy
As long as this high degree of uncertainty is with us, as long as we need to protect firms and people, that necessity of additional support for the economy is there. But we do need to think of the world on the other side. Higher debt, higher deficit, likely higher unemployment and, very important, a risk of higher inequality, more poverty. Now, we have to put smart policies in place, meaning that this very fiscal stimulus that we are going to inject, we have to be thinking of how best to put it in place to do the right thing, and the right thing is, well, make sure that we invest in the economy of the future that is greener, low carbon, resilient to climate shocks.
One of my worries is that the big winner of this crisis, the digital economy, may be good for some but not for all. And by doing that, lack of access for everybody, we expand in inequalities in our society. And we know from previous experiences with pandemics likes with SARS and H1N1 that pandemics push inequality up, especially for the people with lower education, fewer assets in their hands.
Source: CNN’s Amanpour.