Green shoots of economic recovery appearing on the horizon, IMF chief says
Governments around the world should be wary of withdrawing fiscal and monetary policy support “prematurely” as green shoots of economic recovery start to appear, according to the head of the International Monetary Fund.
The multilateral lender, based in Washington, has forecast the global economy to contract 4.4 per cent this year owing to the economic fallout from the coronavirus pandemic. The IMF expects the world economy will rebound to 5.2 per cent next year.
“We must be determined to underpin the road to recovery with continuous strong policy actions.” Kristalina Georgieva told the Caixin Summit. “Do not withdraw fiscal policy support and monetary policy support prematurely.”
The IMF chief said the year 2020 presented the biggest challenge to the world economy since the Second World War and Great Depression.
“Because of the decisive action of governments and central banks, we managed to put a floor under the world economy. And we are seeing the green shoots of recovery,” she told the audience.
She said that the road ahead to recovery is almost certain to be difficult and would require “determined collective action” on the part of world governments, with tackling the health crisis set to dominate agendas.
“We cannot possibly achieve a sustainable recovery unless we have a durable exit from the health crisis,” she said.
“That means taking action to protect people from the virus while it is still with us – and most importantly taking action to have vaccines and treatment and make sure that they are available everywhere.”
The novel coronavirus has so far infected more than 53 million people worldwide. Around 1.2 million people succumbed to the virus as of Friday, according to Worldometers, which tracks the pandemic.
The outlook for the global economy turned optimistic last week, when American pharmaceuticals company Pfizer and Germany’s BioNTech said that their vaccine trial proved 90 per cent effective against the coronavirus.
However, the vaccine has delicate storage requirements and needs to be maintained at minus 75°C, which is colder than any other vaccine. The handling and storage of the vaccine will prove particularly challenging in developing countries.
The IMF’s former head and current European Central Bank president, Christine Lagarde, said in an address last week that the pandemic had created “a big river of uncertainty”. While the election of Joe Biden as the next US president and continuing progress over Brexit talks removed several layers of uncertainty, the ECB president remains concerned about new, mutated forms of the virus.
Last week, Denmark detected a mutated form of the coronavirus in mink and plans to cull the entire population to stop its spread. The cull of nearly all of the Scandinavian state’s mink population is intended to ward off concerns of the mutated virus spreading more virulently among humans, denting vaccine efficacy.
In her address, Ms Georgieva also pointed out the need for a sustainable recovery. She recommended investments in education, health and social protection as well as in enabling greener transition in global economies.
“Public investments that are going to be put in place in the months and years ahead should pursue, first, investment in people,” she said.
“Second, investment in green infrastructure – making sure that we can build a low-carbon, climate-resilient economy for tomorrow,” she added.
Denmark detected a mutated form of the virus in mink and plans to cull the entire population