The International Monetary Fund on Thursday projected a contraction of global output in 2020 and recovery in 2021 as it asked the leaders of the G-20 countries to back a doubling of its USD 50 billion emergency financing capacity in the wake of the coronavirus pandemic.
"We project a contraction of global output in 2020, and recovery in 2021. How deep the contraction and how fast the recovery depends on the speed of containment of the pandemic and on how strong and coordinated our monetary and fiscal policy actions are," IMF Managing Director Kristalina Georgieva said in her address to an emergency virtual summit of G-20 leaders.
"You, the G20 leaders, have already taken extraordinary steps to save lives and safeguard your economies, she said, adding that vulnerable households and businesses need targeted financial support to stay afloat and get back to work quickly. Otherwise it will take years to overcome the effects of widespread bankruptcies and layoffs", she warned.
"Such support will accelerate the eventual recovery, and put us in a better condition to tackle challenges such as debt overhangs and disrupted trade flows, the IMF managing director said.
"And it is paramount we recognize the importance of supporting emerging market and developing economies to overcome the brunt of the crisis and help restore growth," she said. These countries find themselves particularly hard hit by a combination of health crisis, sudden stop of the world economy, capital flight to safety, and for some sharp drop in commodity prices, she added.
"These countries are the main focus of our attention. We have a considerable, USD 1 trillion strong, financial capacity to place in their defense, working closely with the World Bank and other International Financial Institutions (IFIs), she said. Georgieva told the G-20 countries that exceptionally large number of countries simultaneously require IMF emergency financing.
"Emerging markets are dramatically impacted by record high capital outflows and severe shortage of FX liquidity. Many low income countries step into this crisis under a high burden of debt, she said. We will get through this crisis together. Together we will lay the ground for a faster and stronger recovery, she told the G-20 leaders.