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WASHINGTON – The head of the International Monetary Fund says the world economy has begun a long climb toward stronger growth with slightly better prospects than four months ago.
IMF Managing Director Kristalina Georgieva said on Tuesday that global economic activity suffered an unprecedented drop in the spring, when 85 percent of the world economy was locked in for several weeks. Currently, the situation is “less dire” and many countries have seen a better-than-expected rebound in recent weeks.
“We continue to project a partial and uneven recovery in 2021,” Georgieva said in a speech anticipating next week’s fall meetings of the 189-nation IMF and its sister lending agency, the World Bank, where the IMF will unveil its updated economic outlook.
While there has been some improvement, downside risks remain high, Georgieva said in a videoconference address to the London School of Economics.
“The world economy is returning from the depths of the crisis. But this calamity is far from over, ”Georgieva said. “All countries are now facing what I would call ‘The Long Ascent’, a difficult ascent that will be long, uneven and uncertain. And prone to setbacks. “
The global economy has stabilized due to extraordinary policy measures that set a floor, with governments providing about $ 12 trillion in support to households, Georgieva said. She also noted that central banks, including the US Federal Reserve, helped millions of companies stay in business by taking unprecedented monetary measures to make emergency loans.
The support prevented an even deeper recession, but also widened the gap between rich and poorer countries, Georgieva said.
The IMF has done everything it can to support 81 poor countries by contracting more than $ 280 billion in loan commitments, Georgieva said. And the agency is poised to do more with more than $ 1 trillion in total creditworthiness.
New IMF research suggests that increasing public investment by just 1 percent of GDP in advanced and emerging nations can create up to 33 million new jobs, Georgieva said.
One of the key issues to be discussed at next week’s meetings will be how to deal with debt in low-income countries. Georgieva said that rich nations should offer more support to poor nations in the form of grants, rather than loans.
Some countries will have to restructure their debt burdens, with the support of rich countries and private creditors for that effort, Georgieva said. AP
