IMF chief economist expects slow global recovery with pandemic not under control IMF chief economist expects slow global recovery with pandemic not under control Multilateral push can help faster turnaround WASHINGTON, Oct 19:a Global economic
recovery is going to be slow as long as
the COVID-19 pandemic is not under
control, International Monetary Fund (IMF)
Chief Economist Gita Gopinath has said,
calling for multilateral efforts to
contain the virus.
In a remote video interview with Xinhua
earlier this week, Gopinath said economic
outcomes in the second quarter have been
less dire, and global recovery is expected
to be strong in the third quarter.
However, the momentum could slow down
after that.
“We are still living with the pandemic
in many parts of the world, that is going
to slow the recovery because especially
contact-intensive services sectors will
not recover fully as long as the pandemic
is not under control,” Gopinath said.
In its latest World Economic Outlook
(WEO) report, the IMF projected the global
economy to contract by 4.4 percent in
2020, 0.8 percentage point above the June
forecast. Despite the upward revision,
Gopinath said the ascent out of this
crisis is likely to be “long, uneven and
highly uncertain.”
There remains tremendous uncertainty
around the global economic outlook,
according to the WEO report, which
highlighted downside risks such as the
resurgence of the virus, growing
restrictions on trade and investment, as
well as rising geopolitical uncertainty.
“We are very concerned about possible
second waves,” Gopinath told Xinhua. “And
if indeed there is a serious second wave,
which leads to much more widespread
containment measures and lockdown, then
that certainly will be a big downside risk
to our forecast.”
Trade tensions, meanwhile, is also a major
concern, Gopinath said, noting that this
has been an issue even before the
pandemic.
The WEO report showed that global trade
volume is on track to shrink by 10.4
percent this year, followed by an 8.3-
percent rebound next year, which seems to
be in line with weakened global demand,
she noted, adding that trade restrictions
so far haven’t been an important factor in
the contraction of global trade.
Despite that, the IMF chief economist
flagged trade tensions as one of the big
downside risks going forward. “You could
have worsening trade tensions and
investment tensions and technology
tensions, and that can certainly be a hit
to the global recovery,” she said.
“Countries have to be very careful not to
turn protectionist, and to work closely
with other countries,” Gopinath said,
adding that it’s also important to reform
the global trading system, with much work
needed to modernize the multilateral-rules
based World Trading Organization.
CHINA SPILLOVERS
According to the WEO report, China’s
economy is expected to grow by 1.9 percent
in 2020, 0.9 percentage point above the
IMF’s June forecast, making it the only
major economy that will see positive
growth this year.
The upward revision for China resulted in
part from a better-than-projected
performance in exports, Gopinath said.
“The demand for medical equipment and for
office equipment to work from home, that’s
been high. And China’s exports have gone
up because of that,” she said.
A second factor, she continued, is the
strong stimulus from public investment in
infrastructure. “That also surprised on
the upside.”
The IMF chief economist, however, noted
that the recovery in China, like many
other economies, is “somewhat unbalanced,”
with a slower recovery in consumption than
public investment and some other sectors.
“Our view is that going forward, fiscal
policy will have to pivot towards away
from public investment, but towards
provide supporting household incomes and
social safety nets so that the recovery
becomes much more private demand driven as
opposed to kind of public spending
driven,” Gopinath said.
Commenting on China’s role in global
recovery, Gopinath told Xinhua that growth
in China — a major economy — has
“spillovers,” especially to its neighbors.
Through global trade, China is obviously
playing an important role in supplying
much-needed medical equipment, she said.
Meanwhile, Gopinath cautioned that China
will also be under risks if there is
“continued weakness in the global
economy,” adding that it’s important for
the global economy also to recover.
MULTILATERALISM MATTERS
The cumulative growth in per capita income
for emerging-market and developing
economies (excluding China) over 2020-2021
is projected to be lower than that for
advanced economies, which means the
divergence in income prospects between the
two groups is projected to worsen,
Gopinath noted.
“International support will be needed,
especially for low income developing
countries,” the IMF chief economist said,
adding that there needs to be more
concessional financing, more aid, more
grants and more debt relief.
Gopinath also noted this crisis “will
likely leave scars well into the medium
term,” as labor markets take time to heal,
investment is held back by uncertainty and
balance sheet problems, and lost schooling
impairs human capital.
The cumulative loss in output relative to
the pre-pandemic projected path is
estimated to grow from 11 trillion U.S.
dollars over 2020-2021 to 28 trillion
dollars over 2020-2025, according to the
WEO report.
In order to close the gap, countries
should first find a way to solve the
health crisis, the IMF chief economist
said, stressing that greater international
collaboration is needed more than ever.
The IMF estimated that if medical
solutions can be made available faster and
more widely relative to its baseline, it
could lead to a cumulative increase in
global income of almost 9 trillion dollars
by end of 2025.
“The importance of multilateralism has
never been greater,” Gopinath told Xinhua.
“With this pandemic, unless we’re able to
control it everywhere in the world,
nowhere in the world will be safe, and so
countries have to work together.”
|
Popular
SPORTS NOTES
TRADE NOTES
|