Global economic downturn looks less bleak now: IMF MD

12 Oct '20

2 min read

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The world economy was ‘less dire’ than expected, but there is still work to be done to help growth return in ‘the long ascent’ back from crisis, according to International Monetary Fund (IMF) managing director (MD) Kristalina Georgieva, who recently told a virtual event hosted by the London School of Economics that global economic activity took an unpresented fall in the second quarter of the year and the downturn looks less bleak now.

“The IMF in June projected a global GDP [gross domestic product] contraction of 4.9 per cent in 2020. We now estimate that the second-quarter downturn was somewhat less dire than expected, allowing for a small upward revision to our global forecast for 2020. And we continue to project a partial and uneven recovery in 2021,” she said.

She said that the path ahead is still uncertain and that progress on vaccines and therapies could speed up the ascent, but it could also get worse if there is a significant increase in severe outbreaks. She also stressed that the risk to the global economy is still elevated.

“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,” she was quoted as saying by an IMF press release.

She also discussed how the path forward can be paved by confronting the crisis and pushing for transformations particularly through avoiding premature withdrawal of policy support.

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