WASHINGTON – International Monetary Fund (IMF) Managing Director Kristalina Georgieva on Tuesday urged countries to recognize the importance of global trade amid the COVID-19 pandemic and guard against a “dramatic retreat” from globalization.
Noting that inequality tends to go up after a pandemic, the IMF chief said at a virtual event held by the U.S. Chamber of Commerce that “we must put this squarely on our radar screen and recognize the importance of global trade in contributing to lower costs, higher incomes and lower levels of poverty.”
“There would be a natural tendency after this pandemic for countries to turn inwards to build health security and build more independent operations,” Georgieva said. “But we must guard against a dramatic retreat from globalization.”
The IMF managing director said 170 countries — almost 90 percent of the world — will be worse off with lower per capita income by the end of 2020. “Never in our history have we seen such a tremendous reversal of fortunes for so many,” she said.
In mid-April, the IMF projected in its World Economic Outlook that the global economy is on track to contract by 3 percent in 2020. Georgieva said in May that the multilateral lender would “very likely” further cut global growth forecasts, as COVID-19 continues to sweep the world.
Noting that governments have rolled out fiscal measures totaling 9 trillion U.S. dollars globally, Georgieva said at the virtual event that the massive measures have provided a lifeline to many businesses, calling them “well-targeted and well-thought through.”
The IMF chief also noted around 100 billion dollars left emerging markets and developing countries in March amid the COVID-19 pandemic, three times more than during the global financial crisis.
“But in April and May — thanks to this massive injection of liquidity in advanced economies — some emerging markets were able to go back to the markets and issue bonds with competitive yields, with total issuance of around 77 billion dollars,” she said, adding that this is almost three and a half times as much as in the same two months last year.
The IMF chief said some 75 percent of countries are now reopening, and so now is the moment to think carefully about what comes next.
“I believe we should think about building forward — not back — and building a recovery that is focused on a great transformation as we emerge from this exceptional crisis,” she said.
“On the risk side, we will emerge from this crisis with more debt, higher deficits and — in all likelihood — higher structural unemployment and higher levels of poverty,” Georgieva said, calling on countries to think carefully how to mitigate these risks with right economic policies.
The crisis, however, also generates opportunities in areas such as digital transformation, green development, as well as building fairer societies, she said.