WASHINGTON: A collapse in consumption and other data point to a downward revision of the International Monetary Fund’s already pessimistic outlook for the global economy given the global coronavirus pandemic, a top IMF official said yesterday.
IMF chief economist Gita Gopinath said economic data gathered since April were confirming the IMF’s forecast for a three per cent contraction in global economic output, and pointed toward potentially worse scenarios.
“If anything, it looks like the outlook will worsen,” she told a conference hosted by the Financial Times newspaper, adding that the collapse of consumption would likely “lead to downward revisions.”
In April, the IMF underscored the high level of uncertainty around its outlook, noting that a longer, deeper crisis could result in a contraction of 6pc for 2020 and zero per cent growth in 2021.
“No country is being spared, and the numbers that you see coming in are historical lows,” she said, noting that developing countries and emerging market economies were at particular risk.
Gopinath said there was a possibility of recovery after countries began easing widespread lockdowns, as long as there was sufficient testing for Covid-19, the disease caused by the virus, contact tracing for those who got infected and appropriate quarantining of those who become ill.
She pointed to a rebound in China, where external demand remained weak but domestic demand was picking up.
In an apparent reference to increased tensions between the US and China, Gopinath said it was imperative to de-escalate trade tensions and impairment of cross-border capital flows to avoid further harm to the global economy.
“If we want to have a recovery where we have firms reopening, production taking place (and) people being rehired ... we cannot have a further breakdown in global supply chains,” she said.
Gopinath also underscored the need to provide ample liquidity for countries hit hard by the crisis, noting the needs of emerging economies and developing countries would likely exceed the $2.5 trillion the IMF had initially forecast.
All options remained on the table, she said, despite resistance by the US to an allocation of the IMF’s Special Drawing Rights currency, which is akin to a central bank “printing” new money.
“We’ve been very clear to the membership about what the needs will be – and they will be substantial,” she said.