World heading to recession, warns IMF chief

WASHINGTON: International Monetary Fund (IMF) President Kristalina Georgieva warned on Tuesday that she expects a global recession this year due to the Coronavirus (Covid-19) outbreak.

In a statement released by her office in Washington, the IMF chief said that since the breakout, 80 countries had sought help from the Fund to cope with its consequences.

The statement followed a meeting of the G20 finance ministers and Central Bank governors that took place online due to the Corona scare. The group represents the world’s 20 most influential nations.

Another statement said that G20 finance ministers and central bank governors also conceded that the global economy was heading to a recession and that “coordinated fiscal action” was needed to deal with this crisis.

Ms Georgieva said the IMF was focusing on policy actions to reduce the impact of this crisis and was ready to assist those needing financial support.

“We will massively step up emergency finance — nearly 80 countries are requesting our help — and we are working closely with the other international financial institutions to provide a strong coordinated response,” she said.

Ms Georgieva reminded the world’s richest nations that now was the time for solidarity, noting that this was also the main theme of the G20 meeting.

“The outlook for global growth is negative for 2020, and perhaps a worse recession is expected, as in the time of the global financial crisis. We expect recovery in 2021,” Ms Georgieva said.

The IMF chief also highlighted this point in her address to the G20 meeting.

Ms Georgieva said that efforts to control the epidemic should be the first priority of all governments who need to devote their resources to strengthening their health systems.

But the IMF chief warned that “the economic impact of the epidemic will be severe” too and the recovery could be fast and strong, only if the virus was stopped quickly.

She noted that many countries support the extraordinary financial measures taken to improve the health system and protect the workers and businesses affected by the epidemic.

But they also welcome the steps taken by large central banks to expand monetary policy, she added.

Pointing out that many emerging economies and low-income countries face significant challenges, Ms Georgieva noted that $83 billion had flown out of emerging markets since the beginning of the crisis, which was “recorded as the largest capital outflow ever.”

The IMF chief reminded the international community that the Fund was ready to use its $ 1 trillion credit capacity to combat the epidemic.