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Wednesday, October 4, 2023

Recovery is underway after worst global recession since World War II – IMF MD

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A day after the International Monetary Fund (IMF) forecast a global growth of six per cent for this year, IMF Managing Director Christine Georgieva has said that after the worst global recession since the Second World War, the recovery is underway. 

The outlook, she asserted, is brighter because millions of people are benefitting from vaccinations and because of further policy support, especially in the US. Georgieva said this is adding to the exceptional and coordinated actions taken over the past year. 

“Without them, without those fiscal and monetary measures, the global contraction last year would have been three times worse. This could have been another Great Depression,” she noted. 

“We have a good news that there is light at the end of the tunnel. After the worst global recession since the Second World War, the recovery is underway. As you know, yesterday we lifted our global growth forecast to 6 per cent for this year, 4.4 per cent for 2022,” Georgieva told reporters at the start of the annual Spring Meeting of the IMF and the World Bank on Wednesday (April 7). 

Yet, while there is light, the crisis continues to cast a dark shadow. Economic fortunes are diverging dangerously. A small number of advanced and emerging market economies, led by the US and China, are powering ahead. Weaker and poorer countries are falling behind in this multi speed recovery, she rued. 

“We also face extremely high uncertainty, especially over the impact of new virus strains and potential shifts in financial conditions. And, there is the risk of further economic scarring from job losses, learning losses, bankruptcies, extreme poverty, hunger. Policymakers must take the right actions now by giving everyone a fair shot – not just into people’s arms, but also in people’s lives and in vulnerable,” the IMF MD said. 

The Global Policy Agenda released by the IMF, she said, focusses on three things: a fair shot at the vaccine, a fair shot at recovery and a fair shot at the future. 

“This is perhaps the most consequential decision that any government can make this year. The focus should be on scaling up public investment in green projects and digital infrastructure, in people’s health and education, to ensure that everyone can benefit from the historic transformation to greener, smarter, more inclusive economies,” she argued. 

“To unlock this potential, countries will need sufficient public revenues, and they would need more efficient spending. In many cases, this will mean more progressive taxation and an agreement on questions like minimum taxation for companies and international tax rights. This has to be coupled with stronger support for poorer countries as they fight the crisis and seek to invest in the future,” Georgieva said. 

She said the IMF will propose a new Special Drawing Rights (SDR) allocation of USD 650 billion. 

“This will help address the long term global need for reserve assets and provide substantial liquidity boost to all our members, especially the most vulnerable. What this crisis has shown us is just how inescapable our shared destiny is. Now, we must build on this broader sense of common responsibility to foster a fair recovery and a resilient post pandemic world,” she said. 

Responding to a question, Georgieva said after the global financial crisis, the most important lesson the world learned was that we needed to boost the resilience of the banking system. 

“And we did it. After this crisis, our understanding of the importance to work together to build resilience to future shocks is definitely much more profound, and it is that concentration within communities, countries, and internationally, on building resilience of people, investing in education, health, social protection, building the resilience of our planet,” she added. 

Georgieva said many of us were worried that the pandemic would push aside concerns about this other crisis, the climate crisis. 

“That did not happen. On the contrary, we are much more understanding of this interdependence and also our dependence on nature,” she added. 

“A more comprehensive resilience of the economy even going back to the global financial crisis, now we recognise that we worked on the banking system but not on the non-banking financial institutions, and we are seeing that we have to expand this resilience building more broadly towards them as well,” she said. 

Georgieva said that she thinks this is a change we all have to integrate in our thinking, and hopefully it would help us to be much more proactive as a world community, as countries, as businesses and families, towards this more resilient world. 

“It is not by chance that we all recognise that digitalization, climate resilience, the transition to the new climate economy, more attention to equality, these are lessons we are taking with us,” she said.

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