The world economy will perform better than feared at the height of the coronavirus pandemic, but the “calamity is far from over”, according to Kristalina Georgieva, head of the IMF.
The fund’s managing director, ahead of next week’s virtual IMF and World Bank annual meetings, called on advanced economies to do “whatever it takes” and poorer nations to do “whatever is possible” to foster the best possible recovery from the pandemic.
She urged nations not to withdraw economic support early and to begin to plan for a protracted recovery period because “there is the risk of severe economic scarring from job losses, bankruptcies, and the disruption of education”.
This would keep global output “well below our pre-pandemic projections over the medium term”, Ms Georgieva said. “For almost all countries, this will be a setback to the improvement of living standards.”
The cautious message, delivered in an online lecture to the London School of Economics on Tuesday, set the tone for next week’s meetings, which are based around the theme of a “long ascent” from the pandemic towards greener and more resilient economies in the 2020s.
Extensive government health and fiscal support would lead the IMF to revise higher its forecasts for the global economy from those in July, Ms Georgieva said, but the upgrades would not be large and the figures would still show 2020 as the worst year for the global economy since comparable records began in 1980.
The recovery in 2021 would be “partial” and “uneven”, she added. Advanced economies, with their access to global bond markets and ability to borrow freely, would be better placed than poorer nations.
The IMF will recommend a four-stage plan for the year ahead to protect health as the pandemic persists, then maintain economic support and investment for the future. Finally, it said, countries should deal with the debts accumulated during the coronavirus crisis.