Almost 90 per cent of the world, or about 170 countries, will be “worse off” with lower per capita income by the end of this year, despite an injection of about $9 trillion (Dh33tn) by governments and central banks to stabilise the pandemic-battered global economy, according to the International Monetary Fund.
The latest forecast is a sharp divergence from the Washington-based lender’s January projection of economic growth for 160 countries and positive per capita income this year.
"Never in our history have we seen such a tremendous reversal of fortunes for so many," Kristalina Georgieva, managing director of the IMF, said in a speech to the US Chamber of Commerce on Tuesday. "We have never had such a truly global crisis as the one we face now."
The coronavirus outbreak has claimed more than 411,000 lives and infected more than 7.2 million people worldwide, according to Johns Hopkins University, which is tracking the outbreak.
The pandemic had forced governments to close borders and shut all but essential businesses to stem the spread of the virus. Major economies around the world are now opening up gradually, four months after the World Health Organisation declared Covid-19 a pandemic.
The infection rate however, is rising in some emerging markets, and the WHO on Tuesday warned that the coronavirus outbreak is far from over.
Governments and central banks across the globe have pumped about $9tn into the world economy to revive output, stem job losses, support small businesses and stabilise financial markets.
On Wednesday the Organisation for Economic Cooperation and Development Global said global output is forecast to contract 7.6 per cent in 2020 in the absence of a Covid-19 vaccine, and unemployment in some of the world’s largest economies could more than double to about 11 per cent. The World Bank has projected global output shrinking 5.2, while the IMF forecasts a 3 per cent contraction this year.
Various fiscal and economic stimulus packages, have provided “a lifeline to many businesses, and we believe these measures to be well-targeted and well-thought through”, Ms Georgieva said. “They are temporary and — as such — they are a bridge to the recovery, but not a risk to the recovery as it arrives.”
The world economy, she said, will emerge from “the great lockdown” with more debt, higher deficits and, in all likelihood, higher structural unemployment. However, since 75 per cent of the economies are reopening, it is time to focus on risks and what shape the recovery should take.
In March, emerging markets recorded outflows of around $100 billion, three times more than during the 2008-9 global financial crisis. However, in April and May funds started flowing back in on the back of a massive injection of liquidity in advanced economies.
“Unfortunately, for [emerging] countries in debt distress, affected by fragility and conflict or with bad underlying conditions, the crisis is terrible,” Ms Georgieva said. “The same way people with weaker immune systems are more at risk from the coronavirus, so weaker economies are at more at risk from the economic shock.”