World

IMF says coronavirus recession will be worse than 2008, as UN appeals for aid for poorest economies

The coronavirus pandemic will cause a global recession in 2020 that could be worse than that seen during the global financial crisis of 2008-2009, but the world's economic output should recover in 2021, the International Monetary Fund said Monday.

UN chief also calling for worldwide ceasefire and focus on 'true fight of our lives'

A closed restaurant sign is posted due to the coronavirus pandemic. Toronto's Fairmont Royal York Hotel can be seen in the reflection. (Nathan Denette/The Canadian Press)

The coronavirus pandemic will cause a global recession in 2020 that could be worse than that seen during the global financial crisis of 2008-2009, but the world's economic output should recover in 2021, the International Monetary Fund (IMF) said Monday.

IMF managing director Kristalina Georgieva welcomed extraordinary fiscal actions already taken by many countries to boost health systems and protect affected companies and workers, and steps by central banks to ease monetary policy, adding, "even more will be needed, especially on the fiscal front."

Georgieva issued the new outlook after a conference call of finance ministers and central bankers from the Group of 20 of the world's largest economies, who she said agreed on the need for solidarity across the globe.

"The human costs of the coronavirus pandemic are already immeasurable, and all countries need to work together to protect people and limit the economic damage," Georgieva said.

More countries are imposing lockdown measures to contain the rapidly spreading virus.

Kristalina Georgieva, Managing Director of the International Monetary Fund, says the recession will be worse than in 2008, but that there should be significant recovery in 2021. (Jens Meyer/The Associated Press)

Georgieva said the outlook for global growth was negative, and the IMF now expected "a recession at least as bad as during the global financial crisis or worse."

Earlier this month, Georgieva had warned that 2020 world growth would be below the 2.9 per cent rate seen in 2019, but stopped short of predicting a recession. Trade wars pushed global growth last year to the lowest rate since a 0.7 per cent contraction in 2009.

On Monday, Georgieva said a recovery was expected in 2021, but to reach it countries would need to prioritize containment and strengthen health systems.

"The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be," she said.

Georgieva said the IMF would massively step up emergency finance, noting that 80 countries have already requested help and that the IMF stood ready to deploy all of its $1 trillion in lending capacity.

Advanced economies were generally in better shape to deal with the crisis, but many emerging markets and low-income countries face significant challenges, including outward capital flows.

Investors have already removed $83 billion from emerging markets since the start of the crisis, the largest capital outflow ever recorded, Georgieva said.

The IMF is particularly concerned about low-income countries in debt distress and was working closely with them to address those concerns, she added.

The IMF called again on members to contribute funds to replenish its Catastrophe Containment and Relief Trust to help the poorest countries.

UN chief Antonio Guterres said Monday that the world body wants $2 billion to help poor countries combat coronavirus and warned that a massive, co-ordinated package would also be needed to deal with the pandemic's social and economic impact around the world.

"The package needs to make households be afloat, make businesses be afloat, keep societies being afloat," Guterres told a virtual news conference.

UN Secretary General Antonio Guterres is calling for a worldwide ceasefire as countries try to fight the coronavirus pandemic. (Salvatore Di Nolfi/Keystone via AP)

"This will require a double-digit of GDP [gross domestic product] support in the developed world and creating the conditions through the IMF, through the swaps among central banks, through the creation of new facilities," he said.

The spread of the highly contagious COVID-19 respiratory illness caused by the coronavirus has drawn comparisons with devastating periods such as the Second World War, the 2008 financial crisis and the 1918 Spanish flu.

"We need a much stronger co-ordination," said Guterres, adding that he had written to the world's 20 largest economies [G20] and would join their virtual meeting later this week.

"Co-ordination in making sure that not only the developed countries can respond effectively to the disease, but that there is massive support to the developing world not to let the disease spread like wildfire," he said.

Guterres said he would launch a $2 billion humanitarian appeal on Wednesday.

He also called for a global ceasefire so the world can focus on fighting the coronavirus pandemic.

"It is time to put armed conflict on lockdown and focus together on the true fight of our lives," Guterres said.

The United Nations has been trying to mediate an end to conflicts in countries including Syria, Yemen and Libya, while also providing humanitarian assistance to millions of civilians.

"End the sickness of war and fight the disease that is ravaging our world," he said. "It starts by stopping the fighting everywhere. Now. That is what our human family needs, now more than ever."

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