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Photo by Hollie Adams / Bloomberg. |
The economy will fully recover from the Covid-19 coronavirus crisis in late 2021. Claudio Losher, who worked for 30 years at the International Monetary Fund (IMF), on the BNR’s Saturday 150 program.
Losher insists that debt relief must be introduced not only for the poorest countries. Otherwise, the health and economic crisis will continue for longer than expected.
“Recovery will be slow. Some experts describe it as the Latin letter U, others with V. I would describe it as a mark, as some people call the symbol we put when we want to mark something in the check box (√). It has a very steep part, which is where our economy is at the moment, but a much smoother second part, which will be its recovery, “Losher said.
The world will experience the worst year since the Great Depression due to the Covid-19 pandemic. The warning was issued by the Managing Director of the International Monetary Fund Kristalina Georgieva during the week during which the Fund’s traditional spring meeting with the World Bank was held.
The global elite has joined the view that urgent measures are needed to help countries combat both the infection itself and the economic consequences it causes. Everyone is convinced that a large amount of money should be invested. How to find them? This is the question that separates the parties.
Throughout the week, our eyes are on Washington, where the headquarters of the International Monetary Fund and the World Bank are located, two institutions from which more and more countries seek help to escape the economic disaster that has affected us since Covid-19 .
According to Losher, the situation is an “unprecedented disaster.”
“I would like to divide the developing world into two categories. One refers to the very poor countries for which the International Monetary Fund and the World Bank, as well as the Paris Club, which includes many of the G20 countries, already They have announced relief. This is a very important step and I am convinced that it will help these countries face the situation much faster than if their debt were not alleviated. These are really the poorest countries in the world, “he said.
“Now the question is about the countries in the middle: I am talking about developing countries in Latin America, parts of Asia and the Middle East and even Europe. The problem is that currently there is no tool that allows them to defer payments on their debt. Here I see the most serious role of the International Monetary Fund, the World Bank and the big private lenders, who can find options to defer payments, or at least the main ones. I know it is not easy to achieve this at all, but it has to be done. “he adds.
Professor Campbell Harvey of Duke University commented: “When comparing this recession with the global financial crisis, we will find quite a few differences.” The financial crisis was triggered by structural problems, as banks in the United States and other parts of the world were taking too great risks and operating more as hedge funds, and therefore ran into trouble and had to declare bankruptcy. However, the current crisis is not caused by bank failures or problems in other sectors. It is a natural disaster, a biological event, but it also has economic consequences. “
According to him, there is light at the end of the tunnel. “This biological event has an end and it is reasonable that we wait for it in two stages.” The first is a pharmacological solution that will reduce symptoms and alleviate the condition, or in other words, if you become infected with Covid-19, your chances of a full recovery are much greater. This is expected to be a fact in the fall of 2020. The next stage is the creation and distribution of the vaccine. This is likely to happen in early 2021. “
In his words, “all this will continue for a short time, but it will be painful.” “What we need to do is take steps to make sure that all the small and medium-sized businesses that are impacted by Covid-19 are restoring their businesses,” he says.
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