Kristalina Georgieva, Managing Director, InternationalMonetary Fund (IMF) during annual meetings with World Bank claimed that thestory of the world is better than it was three months ago, but was “direnonetheless”.
More significantly, the proceedings claimed that the economiccontraction as a consequence of the pandemic will be the worst in the last 80years.
The same is not just some academic research, with thetangible effects including raising the world poverty rate, worseninginequalities, and hurting long-term economic growth prospects.
Central banks all over the world supported with about $12trillion and this helped stave off a bigger collapse.
In June, the estimate for global contraction was 5.2 and nowthe estimate is a slightly less-worse 4.4%. The latter too is the deepest sincethe Great Depression.
Also, the policy actions of governments the world over tohandle the pandemic’s fallouts have skyrocketed the debt.
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That debt needs to be sorted out. For advanced economies,the proceedings see a couple of years of financial pain while for others e.g. LatinAmerica, the suffering may last till much more.
In the US and other advanced economies, that means a coupleyears of acute pain even with fiscal stimulus and monetary policy easing theblow. Suffering may last longer in Latin America, where the fund sees averageper capita income remaining below 2015 levels through 2025.
Fiscal and monetary steps have helped cushion the world froman even uglier outcome, but the endgame can’t come until there’s a medical fix.
The reports claim that the financial support and policymeasures may have helped slow down the descent into a deep pit, but there canbe no normalcy until a medical solution makes the COVID-19 irrelevant.
Kristalina Georgieva claims, “Until we have a durable exitfrom the health crisis, we will be faced with difficulties, uncertainty, anduneven recovery.”