World economy would suffer 'severe recession', warns IMF

THE International Monetary Fund (IMF) managing director Kristalina Georgieva has warned that the global economy is bound to suffer a "severe recession" in 2020 due to COVID-19 pandemic.

The current crisis posed "daunting challenges" for policymakers in many emerging markets and developing economies, she said.

Georgieva added that a large global contraction in the first half of this year was inevitable.

She said the coronavirus pandemic hit the world economy when it was already in a fragile state as it was weighed down by trade disputes, policy uncertainty and geopolitical tensions.

"The global COVID-19 outbreak is a crisis that is like no other and poses daunting challenges for policymakers in many emerging market and developing economies (EMDEs), especially where the pandemic encounters weak public health systems, capacity constraints, and limited policy space to mitigate the outbreak's repercussions," Georgieva said.

She said, "Medium-term projections are clouded by uncertainty regarding the pandemic's magnitude and speed of propagation, as well as the longer-term impact of measures to contain the outbreak, such as travel bans and social distancing".

Rising malnutrition is expected as 368.5 million children across 143 countries, who normally rely on school meals for a reliable source of daily nutrition, must now look to other sources, the IMF official said.

Countries that were affected early—such as China, South Korea, and Italy—have suffered large contractions in manufacturing activity and services, exceeding the losses recorded at the onset of the global financial crisis, Georgieva said.

"A large global contraction in the first half of 2020 is inevitable. Prospects thereafter depend on the intensity and efficacy of containment efforts, progress with developing vaccines and therapies, the extent of supply disruptions, shifts in spending patterns, the impact of tighter financial conditions on activity, and the size of the policy response," Georgieva said.

"While the recovery is expected to pick up in 2021, by end-2021 global output would remain significantly below the pre-crisis trend," she said.

"The first priority must be to limit the human toll from the pandemic. Policymakers must use all instruments at their disposal to slow the pandemic's spread and prevent overloading their health systems—the idea of a trade off between saving lives and saving livelihoods is a false dilemma," she added.