The global economic outlook has further worsened as last month the IMF forecast that it would face the worst blow since the 1930s due to the COVID-19 crisis, according to IMF managing director Kristalina Georgieva.
In June, the fund will publish revisions to its global economic forecasts, which reflects that the COVID-19 pandemic had spread widely and the worldwide economic impact had intensified, Ms Georgieva said.
The IMF forecast in mid-April a contraction of 3% in global output, with developing and emerging economies contracting 1% and advanced economies 6.1% over the course of this year.
On Tuesday, she said in an interview during the FT’s Global Boardroom online conference that with the crisis still spreading, the economic outlook is even worse than our already pessimistic projection. A more adverse development is likely for many economies, without medical solutions on a global scale.
Ms Georgieva said the fund’s last forecast that developing and emerging countries would need $2.5tn of financial assistance to get them through the virus crisis would also be revised upwards.
Ms Georgieva said that countries had announced financial support measures adding up to $8.7tn since the onset of the coronavirus crisis and added that the fund’s message to its members was to spend as much as you can and then a little bit more.
However, she also added that the record capital outflows emerging economies experienced in March had seen a reversal last month, thanks in part to liquidity injections by central banks such as the US Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England which had fuelled investors’ bond-buying.
The IMF has been under pressure to expand its particular drawing rights – a type of reserve assets which can be used by countries as additional liquidity – in order to further help countries that are facing cash flow problems. However, the US vetoed the proposal last month.
Ms Georgieva showed regret that the fund had been unable to expand SDRs, but she said existing SDRs would be used to help countries most in need.