Gita Gopinath said this is the first time that the advanced economies and the developing economies have been hit equally hard by a crisis. In previous crises, only some economies got hit.
New Delhi, April 15:
International Monetary Fund (IMF) chief economist Gita Gopinath has pegged the loss to the world economy at $9 trillion in 2020-21. She said if you combine the size of economies of Japan and Germany, the loss is bigger than that. She underlined that requirement for fiscal stimulus is massive.
She said, “It is a shock like no other. It is a viral pandemic… It has led people to stay home, not allowing to go to work for many weeks and months. There is tremendous uncertainty in it about what is coming up next. So the real consequences are tremendous everywhere.”
The IMF chief economist said the previous economic crisis like that of 2008 came and went like financial bubbles. This coronavirus pandemic-induced economic crisis is different, she said.
Gita Gopinath said this is the first time that the advanced economies and the developing economies have been hit equally hard by a crisis. In previous crises, only some economies got hit.
She said the IMF is expecting a very low growth this year but there could be recovery next year. “However this recovery is not guaranteed. This could be worse if the pandemic lasts longer,” said Gita Gopinath adding that despite gloomy picture this economic crisis cannot be left unattended by the governments to recover on its own.
The IMF has projected that the world economy may contract by 3 per cent this year due to the Covid-19 pandemic.
“We have a $1 trillion capacity. We are still in a position to meet demands… IMF cannot lend to countries where debt is unsustainable. It is just how the rules of the game are here,” she said.
She said more than 100 countries have sought money from the IMF. Gita Gopinath said the world’s economic picture would be gloomier if coronavirus pandemic returns in a second wave later this year or spills over the next year.
If this happens the global economy will contract by six per cent this year and clock a growth rate of zero per cent next year, Gita Gopinath said.
In the course of recovery, the governments will have to ensure that small and medium scale industries get financial support, she said adding that it would be important to ensure that the financial markets keep functioning smoothly.
On how, India should respond given that it was already going through a patch of economic slowdown from coronavirus shock, she said, “This is a crisis that calls for a strong government action. This situation requires support for people and for firms affected by it. They require supportThere is need to increase their spending. This has to be done by all the affected countries in the world. India too will have to increase its spending.”
