Kristalina Georgieva, Managing Director, International Monetary Fund (IMF) during annual meetings with World Bank claimed that the story of the world is better than it was three months ago, but was “dire nonetheless”.
More significantly, the proceedings claimed that the economic contraction as a consequence of the pandemic will be the worst in the last 80 years.
The same is not just some academic research, with the tangible effects including raising the world poverty rate, worsening inequalities, and hurting long-term economic growth prospects.
Central banks all over the world supported with about $12 trillion and this helped stave off a bigger collapse.
In June, the estimate for global contraction was 5.2 and now the estimate is a slightly less-worse 4.4%. The latter too is the deepest since the Great Depression.
Also, the policy actions of governments the world over to handle the pandemic’s fallouts have skyrocketed the debt.
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That debt needs to be sorted out. For advanced economies, the proceedings see a couple of years of financial pain while for others e.g. Latin America, the suffering may last till much more.
In the US and other advanced economies, that means a couple years of acute pain even with fiscal stimulus and monetary policy easing the blow. Suffering may last longer in Latin America, where the fund sees average per capita income remaining below 2015 levels through 2025.
Fiscal and monetary steps have helped cushion the world from an even uglier outcome, but the endgame can’t come until there’s a medical fix.
The reports claim that the financial support and policy measures may have helped slow down the descent into a deep pit, but there can be no normalcy until a medical solution makes the COVID-19 irrelevant.
Kristalina Georgieva claims, “Until we have a durable exit from the health crisis, we will be faced with difficulties, uncertainty, and uneven recovery.”