Covid spends 21 210 million: IMF warns pandemic could cause ‘permanent damage’ to global living standards
The International Monetary Fund has warned that the Covid crisis will create a 21 210 million hole in the global economy and cause “permanent damage” to living standards.
After the total death toll from the epidemic rose to over one million people, the Washington-based Watchdog yesterday explained the devastating global impact of the virus on the economy.
In its latest global economic outlook, the IMF has predicted that the crisis will leave financial scars year after year and recover from ‘long, uneven and uncertain’.
Disaster: IMF chief economist Geeta Gopinath says the crisis will cut short and any recovery will be ‘long, uneven and uncertain’
It also predicts that the total loss of epidemic-driven output will decrease by $ 280 million (21 21 million) by the middle of the decade.
It is worth more than the size of the US economy, which is the largest in the world.
Geeta Gopinath, the IMF’s chief economist, said it “represents a serious setback for improving the average living standards of all countries.”
He added: ‘The crisis is likely to pick up in the medium term as labor markets take time to heal, investment is delayed due to uncertainty and imbalance problems, and schooling disrupts human capital.
‘All countries are now facing what they would call a long ascent. A difficult ascent that is long, uneven and uncertain. And disaster prone.
‘The road ahead is cloudy with extraordinary uncertainty. Rapid advances on health systems such as vaccines and therapy can accelerate the climb. But it can be even worse, especially if there is a significant increase in fatal outbreaks. ‘
Despite all this, the IMF has become less optimistic since the summer, with the global economy forecast to shrink by 4.4 percent this year.
The IMF predicts that the total loss of output driven by the epidemic will hit tr 28trillion (21trillion) by the middle of the decade.
This marks the improvement of the 5.2 percent contraction predicted in its latest global economic outlook in June.
The upgrades both reflect that the recession in the second quarter was not as severe as previously feared, and that economies around the world returned faster than expected due to the withdrawal of the lockdown.
But even a 4.4 percent contraction would be the worst global collapse since the Great Depression of the 1930s, the fund said.
The IMF warned that the recovery would be a bit slower than previously thought, amid restrictions to slow the spread of infections and a new wave of lockdowns and outbreaks.
This sentiment was echoed by Andrew Bailey, Governor of the Bank of England, who yesterday told colleagues in the House of Lords’ Committee on Economic Affairs: ‘Hard yards are still ahead of us.’
Experts have expressed surprise at the strength of the UK’s economic recovery since the national lockdown imposed in March was lifted.
However, local lockdowns and other restrictions to deal with the second wave of the virus have raised fears that the recovery could be halted.
The IMF has slightly modified its projection for the UK, predicting that the economy will shrink by 9.8 per cent this year, as in France.
This compares with the 10.2 percent expected in June. The UK is expected to lag behind the eurozone, which is forecast to be 8.3 per cent contracted this year.
Of the G7 group’s large developed economies, only Italy expects worse.
But the UK economy is also expected to return 5.9 percent faster next year than the euro.
The IMF stressed that the global outlook would have been weakened had it not been for the “unprecedented financial, financial and regulatory response” to the growth of family income and business.
Gopinath said the steps taken had ‘helped save lives and livelihoods and prevent financial catastrophe’.
But when the government thinks about tackling Kovid’s debts, he warns: “It is imperative that fiscal and monetary policy should not be lifted as untimely as possible.”