Global Business

Global economic bailout to hit $19.5t in 2020: IMF

Issac John /Dubai Filed on November 19, 2020

Roadblocks to securing additional financial support could damage the already fragile recovery

The International Monetary Fund estimates governments and central banks around the world might spend $19.5 trillion to put “a floor under” the world economy which has been reeling under catastrophic impact the of the pandemic.

As the world faces a crisis like no other, governments have announced nearly $12 trillion in stimulus measures as of September and central banks across the world have already spent a combined $7.5 trillion to soften the impact of the pandemic on their economies, the IMF said.

However, despite all these measures some countries need even more help to bounce back from the crisis, but they might not get it, the IMF said.

“Despite the unprecedented amounts in tax cuts, wage support, small business loans and cash payments, the world economy is still struggling. The state of the world economy is worse when compared with that during the Great Depression,” the 2020 IMF Annual Report said.

"Uncertainty remains around the outlook, alongside long-term forces that shape and influence countries’ response to the virus and the recovery. People all over the world have seen profound changes in their lives: economic recession, unemployment, climate change, technology and the automation of jobs, the rise of digital currencies, lower returns on their savings, and rising inequality and debt," the IMF said.

The fund expects these numbers to remain worse than pre-pandemic levels throughout at least the next year.

Economic activity is at record lows and unemployment at highs in many parts of the world, including in the United States and Europe. "Countries now face a long ascent that will be difficult, uneven, uncertain and prone to setbacks," the IMF’s managing director Kristalina Georgieva said in the report.

While coronavirus vaccine candidates point to improved prospects for the global economy next year, they won't help countries much in the immediate future. And roadblocks to securing additional financial support could damage the already fragile recovery, said the annual report.

In the US., the release of new aid is expected to face challenges as the government transitions to a new administration. President Donald Trump's unwillingness to concede defeat might further delay the approval of new aid. The country is still down some 10 million jobs since before the pandemic began and several states are now imposing fresh curbs to curb the rise in cases, which will further weigh on the recovery

In Europe, debate over new measures might place added pressure on the region's recovery. The European Union is undecided on the release of its planned $950 billion coronavirus recovery fund - which is meant to be rolled out in January.

Economists said pulling government support too soon might threaten the strength and pace of economic recovery. This might be a risk for economies in the short term and a "self-defeating mistake."

Withdrawing fiscal support prematurely is "the biggest risk" facing economies in the short term, according to Neal Shearing, group chief economist at Capital Economics.


Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.

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