IMF Chief predicts worst economic fallout since Great Depression

New Delhi: As the world deals with the coronavirus crisis, the Managing Director of International Monetary Fund (IMF), Kristalina Georgieva has said that the world may face the worst economic fallout since the Great Depression of the 1930s.

In her latest address on Thursday, she said that the global growth will turn sharply negative in 2020, and over 170 countries will experience negative per capita income growth this year.

“It is already clear, however, that global growth will turn sharply negative in 2020, as you will see in our World Economic Outlook next week. In fact, we anticipate the worst economic fallout since the Great Depression,” said the IMF Chief.

She said that the bleak outlook applies to advanced and developing economies alike. “This crisis knows no boundaries. Everybody hurts,” she said.

Given the necessary containment measures to slow the spread of the virus, the world economy is taking a substantial hit, Georgieva said, adding that this is especially true for retail, hospitality, transport, and tourism.

In most countries, the majority of workers are either self-employed or employed by small and medium-sized enterprises and these businesses and workers are especially exposed, she said.

She also noted that the economic crisis is expected to hit vulnerable countries hardest. Emerging markets and low-income nations, across Africa, Latin America, and much of Asia, are at high risk.

With weaker health systems to begin with, many face the dreadful challenge of fighting the virus in densely populated cities and poverty-stricken slums, where social distancing is hardly an option, said the IMF Chief.

“With fewer resources to begin with, they are dangerously exposed to the ongoing demand and supply shocks, drastic tightening in financial conditions, and some may face an unsustainable debt burden.”

She also noted that the emerging and low-income countries also are exposed to massive external pressure.

In the last two months, portfolio outflows from emerging markets were about $100 billion, more than three times larger than for the same period of the global financial crisis, she said. Commodity exporters are taking a double blow from the collapse in commodity prices, and remittances are expected to dwindle.

“We estimate the gross external financing needs for emerging market and developing countries to be in the trillions of dollars, and they can cover only a portion of that on their own, leaving residual gaps in the hundreds of billions of dollars. They urgently need help,” Georgieva added.

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