Moneycontrol PRO
you are here: HomeNewsWorld

IMF chief Kristalina Georgieva warns global economy 'not out of the woods,' dangers lurk

Kristalina Georgieva said the fiscal costs of actions aimed at containing the pandemic and mitigating its economic fallout were driving up already high debt levels, but it was premature to start withdrawing needed safety nets.

July 16, 2020 / 11:41 AM IST

Global economic activity is picking up after an unprecedented decline this year due to the coronavirus pandemic, but a second major wave of infections could trigger more disruptions, the International Monetary Fund's top official said.

IMF Managing Director Kristalina Georgieva said the fiscal costs of actions aimed at containing the pandemic and mitigating its economic fallout were driving up already high debt levels, but it was premature to start withdrawing needed safety nets.

"We are not out of the woods yet," she said in a blog posting ahead of Saturday's virtual meeting of finance ministers and central bank governors from the Group of 20 major economies.

The IMF last month further slashed its 2020 global output forecasts, predicting a 4.9 percent contraction and weaker-than-expected recovery in 2021.

Georgieva said $11 trillion in fiscal measures by G20 members and other countries, as well as massive central bank liquidity injections, have put a floor under the global economy.

Close

COVID-19 Vaccine

Frequently Asked Questions

View more
How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

View more
Show

Even so, dangers lurked, she said, including a major new wave of infections, stretched asset valuations, volatile commodity prices, rising protectionism and political instability.

Some countries lost more jobs in March and April than had been created since the end of the 2008 global financial crisis, and many of those jobs will never return, Georgieva said.

Job losses, bankruptcies and industry restructuring could pose significant challenges for the financial sector, including credit losses to financial institutions and investors, she said.

To ensure stability, continued coordination across central banks and support from international financial institutions was essential, she said. Regulation should also support the flexible use of capital to keep credit lines open for businesses.

"Monetary policy should remain accommodative where output gaps are significant and inflation is below target, as is the case in many countries during this crisis," she said.

In a report to the G20, the IMF warned that rising protectionism and renewed trade tensions endangered the recovery.

A weak recovery itself raised the chances of disinflation and a prolonged period of low interest rates, which could undermine debt sustainability and financial stability, it said.

Follow our full coverage of the coronavirus pandemic here.
Reuters
first published: Jul 16, 2020 11:20 am

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark