“The economic crisis of 2020 may have performed so badly as anticipated earlier by many experts but road bumps still lie ahead said,” Kristalina Georgieva, the International Monetary Fund’s managing director said on Tuesday.
The IMF had earlier anticipated in June that the global economy will contract by 4.9% in 2020.
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Against headwinds, the world economy has ended up performing better than the International Monetary Fund had envisaged in Q2 and Q3. This is expected to lead to an upward revision to its growth forecasts which are scheduled to be released next week
The report went on, saying; We have reached this point, largely because of extraordinary policy measures that put a floor under the world economy. Governments have provided around $12 trillion in fiscal support to households and firms. And unprecedented monetary policy actions have maintained the flow of credit, helping millions of firms to stay in business.
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But some were able to do more than others. For advanced economies, it is whatever it takes. Poorer nations strive for whatever is possible. This gap in response capacity is one reason why we see differentiated outcomes. Another reason is the effectiveness of measures to contain the pandemic and restart economic activities.
For many advanced economies, including the United States and the Euro Area, the downturn remains extremely painful, but it’s less severe than expected. China is experiencing a faster-than-expected recovery. Others are still hurting badly, and some of our revisions are on the downside.
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However, the IMF boss pointed on the prevailing high risks bearing on the global economy from rising bankruptcies and stretched valuations in financial markets, coupled with many leading nations having their debt levels exponentially high because of their fiscal response to the COVID-19 crisis and the fiscal revenue losses recorded.
The report continued, stating; “As we embark on this ‘ascent,’ we are all joined by a single rope—and we are only as strong as the weakest climbers. They will need help on the way up. The path ahead is clouded with extraordinary uncertainty. Faster progress on health measures, such as vaccines and therapies, could speed up the ‘ascent’.
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But it could also get worse, especially if there is a significant increase in severe outbreaks. Risks remain high, including from rising bankruptcies and stretched valuations in financial markets.
And many countries have become more vulnerable. Their debt levels have increased because of their fiscal response to the crisis and the heavy output and revenue losses. We estimate that global public debt will reach a record-high of about 100 percent of GDP in 2020.”
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