It may take until 2023 for the global economy to return to its pre-coronavirus levels, the head of the IMF said on Friday.
“The most severe shock has already occurred,” International Monetary Fund Managing Director Kristalina Georgieva told an event hosted by Politico.
She noted that 170 countries have entered negative economic growth since March. Georgieva said she expects the global economy to shrink further beyond the current IMF estimate of -3 percent GDP in 2020, before a “partial recovery” in 2021.
The economic rupture is causing the IMF to throw out some of its old advice and adopt the posture of global social justice warrior, instead.
She urged governments to spend more and guarantee salaries.
Struggling and bankrupt government have long-dreaded IMF conditions on lending, including strict limits on government outlays and privatizing assets, but while Georgieva still urges governments to “spend wisely,” the emphasis is now very much on the spending.
“Spend as much as you can, and then spend a bit more for your doctors, for your nurses, for the vulnerable people in your society,” she said.
She also said that big technology companies that are reaping gains as result of increased reliance on online systems during coronavirus quarantines and lockdowns should work to increase access to the digital economy for all, the head of the IMF said on Friday.
Georgieva said that while the crisis was devastating the global economy, but it also offered an opportunity to tackle persistent inequality and other priorities such as climate change, if recovery funds were properly focused.
"I very much hope that the leadership of tech companies will see this as a chance to demonstrate responsible capitalism, responsible behavior," she said.
Georgieva said that the big winners from the coronavirus pandemic were the digital economy, and providers of e-commerce, e-government and e-learning services.
Digital companies needed to act in a way that "is good for everybody for society as a whole," Georgieva said, without citing any specific companies. "It will be extremely important for all of us to watch whether there is further division in access to the internet, to the digital economy."
There were high risks that the crisis and its economic damage would worsen inequality, and governments needed to take steps to mitigate these risks, Georgieva said. Government spending to keep companies afloat during shutdowns and workers employed would help with the recovery from the crisis.
The crisis presented an opportunity for governments to invest in environmentally friendly growth stimulus, the IMF head said. Low oil prices also present an opportunity to eliminate "harmful" energy subsidies, a move Georgieva said would reduce government spending at a time of ballooning debt while boosting climate change resilience.
Some conditions for reducing emissions also could be built into the IMF's lending programs, she said.
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