IMF sees a recession at least as bad as global financial crisis

Washington

THE International Monetary Fund said it expects a global recession this year that will be at least as severe as the downturn during the financial crisis more than a decade ago, followed by a recovery in 2021.

Nearly 80 countries have asked the Washington-based IMF for emergency finance, managing director Kristalina Georgieva said in a statement on Monday following a conference call of Group of 20 finance ministers and central bankers. Ms Georgieva said the fund strongly supports extraordinary fiscal actions already taken by many countries and welcomes easing moves by major central banks.

"These bold efforts are not only in the interest of each country, but of the global economy as a whole," she said in the statement. "Even more will be needed, especially on the fiscal front." The Institute of International Finance said earlier on Monday that it projects a 1.5 per cent contraction in the global economy this year, with advanced economies shrinking 3.3 per cent. Updated IMF forecasts are usually released in April with the fund's World Economic Outlook.

"The pace of deterioration in expectations is breathtaking," said Bloomberg chief economist Tom Orlik. "Even so, it's important to keep in mind that - in contrast to the Asian financial crisis, the great financial crisis, or the European sovereign debt crisis - the coming contraction is not a reflection of underlying economic imbalances. When the outbreak is over, that means there's hope growth can get rapidly back on track."

The IMF's statement followed the G-20 officials convening an emergency call on Monday to discuss the global economic fallout from the pandemic and work toward a joint response. Also on Monday the Federal Reserve unveiled a sweeping series of measures including for households and employers that push it deeper into uncharted territory.

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The IMF said it's working closely with other international financial institutions to provide a strong coordinated response, and reiterated that it's ready to deploy all of its US$1 trillion lending capacity.

To have a rebound next year, "it is paramount to prioritise containment and strengthen health systems - everywhere," Ms Georgieva said. "The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be." The IMF noted that major central banks that have initiated bilateral swap lines with emerging economies may need to provide more. The fund said it's also exploring a possible proposal that would help facilitate a broader network of swap lines, including through an IMF-swap type facility. BLOOMBERG