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Recession worse than global financial crisis imminent: IMF

FE Bureau
Investors have already removed $83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded.

A recession "at least as bad as during the global financial crisis or worse" is looming over the world economy in 2020 due to the massive economic and human cost of the coronavirus pandemic, International Monetary Fund managing director Kristalina Georgieva said on Tuesday.

"The outlook for global growth for 2020 is negative...But we expect recovery in 2021. To get there, it is paramount to prioritise containment and strengthen health systems - everywhere. The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be," Georgieva said.

The global financial crisis refers to the period of extreme stress in global financial markets and banking systems between mid 2007 and early 2009. "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.

Following a conference call of G20 finance ministers and central bank governors, the IMF chief said the Fund stood ready to deploy all its $1-trillion lending capacity and was replenishing the Catastrophe Containment and Relief Trust to help the poorest.

Georgieva strongly supported the extraordinary fiscal actions many countries have already taken to boost health systems and protect affected workers and firms as well as the moves of major central banks to ease monetary policy. Even more will be needed, especially on the fiscal front, she said.

"Advanced economies are generally in a better position to respond to the crisis, but many emerging markets and low-income countries face significant challenges. They are badly affected by outward capital flows, and domestic activity will be severely impacted as countries respond to the epidemic," she said.

Investors have already removed $83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded. "We are particularly concerned about low-income countries in debt distress - an issue on which we are working closely with the World Bank," she added.