World Faces Worst Economic Crises Since Great Depression: IMF Chief

Even as the world continues to battle with the deadly COVID-19, the Managing Director of International Monetary Fund (IMF), Kristalina Georgieva said that the world may be hit with the worst economic crises since the Great Depression in the 1930s.

On Thursday, she predicted in her latest address that the global growth will turn sharply negative in the year 2020, and more than 170 countries will experience a negative per capita income growth this year.

"It is already clear, however, that global growth will turn sharply negative in 2020, as you will see in our World Economic Outlook next week. In fact, we anticipate the worst economic fallout since the Great Depression," the IMF Chief said.

Georgieva added that this grim outcome of the pandemic will impact both developed and developing nations. "This crisis knows no boundaries. Everybody hurts," she said.

As a necessary measure to contain the spread of the highly infectious virus, most countries have come to a standstill by imposing complete and partial lockdowns. The IMF chief says that the world economy is taking a hit given these necessary containment measures, adding that this is especially true for retail, hospitality, transport, and tourism.
 
In most countries, the majority of workers are either self-employed or employed by small and medium-sized enterprises and these businesses and workers are especially exposed, she said.

Georgieva said that the inevitable economic crises will hit the vulnerable, poor and developing countries the hardest. Low income nations are at high risk.

Countries with fewer resources may face a great challenge in combating the novel virus. With weaker health systems, containing the virus proves to be a bigger challenge. Also, in densely populated countries with slums , octal distancing is not an option, said the IMF head.

"With fewer resources to begin with, they are dangerously exposed to the ongoing demand and supply shocks, drastic tightening in financial conditions, and some may face an unsustainable debt burden.”

She also said that in the last two months, the portfolio outflows from upcoming markets were about $100 billion, which is more than three times larger than for the same period of the global financial crisis.

"We estimate the gross external financing needs for emerging market and developing countries to be in the trillions of dollars, and they can cover only a portion of that on their own, leaving residual gaps in the hundreds of billions of dollars. They urgently need help," Georgieva added.