IMF chief says the global economy is already stuck in a coronavirus-fuelled recession — and only a coordinated worldwide effort will save it

  • The global economy is facing never-before-seen threats that necessitate cross-border cooperation, the International Monetary Fund chief, Kristalina Georgieva, told CNBC on Friday.
  • “The world is now in recession,” she said, adding that the downturn’s length and depth depend on “containing the virus, and having an effective, coordinated response to the crisis.”
  • Countries should use everything in their policy arsenal to combat the outbreak, Georgieva said, as “small measures” can’t solve “a gigantic crisis.”
  • The IMF said last week that it “stands ready” to employ its $US1 trillion lending pool for cash-strapped nations, with a particular focus on developing countries.
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The global economy is stuck in an unprecedented kind of recession that necessitates international cooperation, the International Monetary Fund chief, Kristalina Georgieva, told CNBC on Friday.

The IMF managing director praised nations that instituted strict containment measures and banned international travel. Virus cases have continued to soar around the world; the US on Thursday became the nation with the most infections.

Despite forecasts of a recession arriving in the second quarter, Georgieva said that the world economy is already mired in deep contraction and that working across borders is the only way to lift the pandemic’s downward pressure.

“We have stated that the world is now in recession and that the length and depth of this recession depends on two things: Containing the virus, and having an effective, coordinated response to the crisis,” she said, adding, “I see a much clearer understanding that if we don’t beat it everywhere, we won’t be able to get out of it.”

The IMF has joined several central banks and governments in issuing swift aid to counteract the coronavirus pandemic’s economic fallout. The international organisation said last week that it “stands ready” to use its $US1 trillion credit capacity to aid countries strapped for cash and that relief for emerging countries is of particular importance.

The economic slowdown taking place around the world warrants the most potent policy response, Georgieva said on Friday. Governments should avoid “small measures now when we know that it is a gigantic crisis,” she told CNBC. Keeping people safe and financially sound is the top priority, and economic recovery can arrive once the virus threat subsides, she added.

“We’ve never seen the world economy standing still. Now we do,” she said. “How we go about revitalizing it is another important topic.”

The House of Representatives was poised on Friday to pass a $US2 trillion stimulus package to combat the economic effects of the coronavirus outbreak. The legislation, which the Senate passed late Wednesday, would issue payments to millions of Americans and unlock hundreds of billions of dollars in loans to keep the economy stable.