The International Monetary Fund is allotting $50 billion (Dh183.6bn) in emergency funding to poor and middle-income countries that may need assistance in responding to the coronavirus outbreak, as the lender sees global growth in 2020 falling below last year's level.
Economic expansion below a 2.9 per cent growth rate for 2019 would mean a downward revision that is more than a 0.4 percentage point from the IMF’s 3.3 per cent growth projection for 2020 released in January.
“How far it will fall, and for how long, is difficult to predict, and would depend on the epidemic, but also on the timeliness and effectiveness of our actions,” IMF managing director Kristalina Georgieva, said at a joint press conference with the World Bank president David Malpass.
“We all recognise that the situation with the spread of the coronavirus is very serious and could well get worse,” Ms Georgieva added.
This developing situation is particularly challenging for countries with weaker health systems and response capacity, she said. That requires a global co-ordination mechanism to accelerate the recovery of demand and supply.
Earlier this week, the Organisation for Economic Co-operation and Development, revised down its estimate of global GDP growth by half a percentage point to 2.4 per cent in 2020. It said growth could fall to 1.5 per cent if the outbreak persisted and could tip many countries into recession.
Ms Georgieva on Wednesday declined to say if the outbreak could push the world into a recession.
The coronavirus, which started in the Chinese city of Wuhan, has spread to more than 80 countries so far with global fatalities rising to more than 3,300. The number of infections has surpassed 96,000 and countries such as Iran, South Korea and Italy are now reporting faster infection rates than China. There are now more than 14,500 cases of the coronavirus outside mainland China, with the number of deaths in Italy and Iran jumping to above 100.
“We know that the disease is spreading quickly," Ms Georgieva said. "With over one-third of our membership affected directly, this is no longer a regional issue – it is a global problem calling for a global response.”
The low-income countries can avail emergency financing of up to $10bn without a full-fledged IMF programme at zero interest through the fund’s Rapid Credit Facility. Other member countries can access emergency financing of $40bn through the Rapid Financing Instrument, Ms Georgieva said.
The fund has about $1 trillion in overall lending capacity, she said.
The IMF’s move follows the World Bank Group’s announcement of setting up an initial fund of $12bn that will disburse grants and low-interest loans to help member-countries cope with the health and economic impact of the outbreak, which presents the greatest challenge to the global economy since the 2008 financial crisis.
“This includes emergency financing, policy advice and technical assistance, building on the World Bank Group's existing instruments and expertise to help countries respond to the crisis," Mr Malpass said in a statement on Tuesday.
The IMF and the World Bank have been leading calls for a co-ordinated global monetary policy action to reduce the impact of the outbreak on the global economy. Concerns over the virus led to an investor sell-off across markets globally last week that wiped $7tn from stock markets and led to the worst weekly decline since the 2008 financial crisis.
Governments and central banks have stepped up efforts to shield their economies from the impact of the outbreak, which has disrupted global supply chains and dented international trade. The US Federal Reserve on Tuesday cut its benchmark rate by 50 basis points, the biggest cut since the 2008 financial crisis, in a bid to protect the longest-ever cycle of economic expansion in the US.
Central banks of the UAE, Saudi Arabia, Kuwait and Bahrain followed suit and reduced rates. The Bank of Canada on Wednesday also cut its key interest rate, while other G7 members pledged to take necessary steps to protect financial markets.