IMF: Covid-19 could lead to worse recession than 2009

Washington, Mar 27 (efe-epa).- The coronavirus pandemic has driven the global economy into a recession with the potential to do more damage than the slowdown that followed the 2008 financial crisis, the head of the International Monetary Fund said Friday.

“We have reassessed the prospect for growth for 2020 and 2021. It is now clear that we have entered a recession – as bad as or worse than in 2009,” IMF Managing Director Kristalina Georgieva said at the start of a virtual press conference.

“We do project recovery in 2021. In fact, there may be a sizeable rebound, but only if we succeed with containing the virus everywhere, and prevent liquidity problems from becoming a solvency issue,” she added.

The number of Covid-19 infections has topped 500,000 worldwide and the death toll is more than 25,000, according to independent tallies by Johns Hopkins University.

The disease is present in 196 countries. The worst-affected are the United States, China – where the outbreak began – and Italy, which has suffered the most fatalities so far.

Georgieva said that emerging markets, even those that experience a relatively small impact from the virus itself, will be battered economically by massive disruptions to trade and tourism.

“Our current estimate for the finance needs of emerging markets is $2.5 trillion, a lower-end estimate for which their own reserves and domestic resources would not be sufficient,” the IMF chief said from Washington.

More than 80 countries have already contacted the IMF to ask for assistance, she said.

The Bulgarian economist said the IMF was pleased to note that “many countries have taken far-reaching measures to address the health crisis and to cushion its impact on the economy, both on the monetary and on the fiscal side.”

She specifically praised the $2.2 trillion relief package passed by the US Senate, which is expected to win approval in the House of Representatives later Friday.

“It is absolutely necessary to cushion the world’s largest economy against an abrupt drop (in) the economic activities,” Georgieva said.

The bill now before the US lower house would expand unemployment benefits – more than 3 million workers have applied for payments in the last week – and provide funding to businesses, with a focus on sectors crippled by the pandemic, such as airlines.

Also part of the package is a three-month extension of the deadline for paying federal income taxes.

Georgieva said that the IMF will offer detailed projections based on the health crisis when it releases the latest edition of the World Economic Outlook during next month’s virtual spring meeting.

EFE afs/dr

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