Covid-19: Global economy has lost Dh55 trillion in output due to pandemic, IMF says

The world economy has lost $15 trillion (Dh55 trillion) in output due to Covid-19 as central banks have provided more liquidity in the past year than in the last 10 years combined, a senior official of the International Monetary Fund (IMF) said.

“Since March 2020, governments have spent $16 trillion (Dh58.72 trillion) providing fiscal support amid the pandemic, and global central banks have increased their balance sheets by a combined $7.5 trillion (Dh27.5 trillion). This was necessary — IMF research indicates that if policymakers had not acted, last year’s recession, which was the worst peacetime recession since the Great Depression, would have been three times worse,” said Geoffrey Okamoto, first deputy managing director of IMF.

Okamoto stressed that the same energy being put into vaccination and plans for recovery spending also need to be put into growth measures to make up for this lost output.

IMF’s first deputy managing director called for difficult reforms that will serve as a springboard to a brighter and more sustainable future rather than a crutch to a weaker version of the pre-Covid-19 economy.

“Seizing the opportunity could deliver years of solid post-Covid-19 growth and progress in living standards. The IMF estimates that comprehensive growth-enhancing reforms cutting across product, labour, and financial markets could raise annual growth in GDP per capita by over one percentage point in emerging market and developing economies in the next decade. These countries would be able to double their speed of convergence to advanced economies’ living standards relative to the pre-pandemic years,” said Okamoto.

IMF warned that recovery from the Covid crisis would take years for most countries if reforms are not implemented.

“Inspiring the next generation to rebuild a brighter future is the primary challenge for this generation of policymakers. They should seize this challenge, daring to be bold as the current crisis reaches a crossroads. Pairing growth reforms with recovery spending will deliver the prosperity that we have promised our citizens, making our fate in a post-Covid-19 world,” said Okamoto.

Going forward, IMF advised that the policymakers need to engineer a fundamental shift from saving their economies from collapse to strengthening their economies for the future with growth-oriented reforms.

-waheedabbas@khaleejtimes.com