World Economic Outlook Press Conference

Good morning, welcome to this

press

conference

on the World Economic Outlook of the International Monetary Fund. Thanks for joining us. These are unusual and challenging circumstances. We hope you and your loved ones are well and staying safe. This time we are doing things a little differently. This

press

conference

is completely virtual and, as such, I encourage you to submit your questions through our online Press Center before answering them. I am delighted to introduce you to our speakers today here in the studio, Geeta Gopinath, Economic Advisor and Director. from the research department Jim Miriam Illes Ferretti deputy director of the research department and joins us remotely, we have Maja Navarra, division head in the research department, good morning, mehar, before answering your questions, I would ask you Geeta to start with some opening remarks and then I'll be happy to answer your questions Geeta, the floor is yours.

Thank you Rafael. Hello, everyone. I hope you are all well and healthy. I would like to start by thanking the many doctors, nurses and first responders around the

world

.

world

who are working so hard to keep us safe during these difficult times now the world has changed dramatically in the three months since our last global

economic

outlook

update in January a rare disaster a corona virus pandemic has resulted in tragically large numbers Human lives are being lost as countries implement the containment measures necessary to control the pandemic. The world has been put under a major lockdown.

The magnitude and speed of the collapse of activity that followed is unlike anything experienced in our lifetimes. This is a crisis like no other which means there is substantial uncertainty about the impact it will have on people's lives and livelihoods; Much will depend on the epidemiology of the virus, the effectiveness of containment measures and the development of therapies and vaccines, variables that are very difficult to predict. In addition, many countries face multiple crises health crises financial crises a collapse in commodity prices commodities, especially for commodity exporters, and all of this interacts in complex ways now policymakers are responding in an unprecedented way by helping households, businesses and financial markets;

However, there is still considerable uncertainty about what the

economic

outlook

will be. what it will look like when we come out of this lockdown, so now, under the assumption that the pandemic and the need to contain and peak in the second quarter in most countries in the world and then recede in the second half This year, we project that global growth in 2020 will fall to minus three percent now this is a reduction of 6.3% EGDE points since January 2020 a major revision in a very short period of time this makes the Great lockdown will be the worst recession since the Great Depression and much worse than the global financial crises assuming the pandemic fades in the second half of 2020 and that policy measures taken around the world are effective in preventing widespread bankruptcies, prolonged losses of jobs and system-wide financial strains, we project that global growth in 2021 will recover to five point eight percent now this recovery in 2021 is only partial, as the level of economic activity is expected to remain below the level that We had projected for 2021 before the virus hit.

The cumulative loss of global GDP in 2020 and 2021 due to the pandemic crisis could be around $9 trillion greater than that of Japan's economies. and Germany combined now this is a truly global crisis as no country is spared Countries that depend on tourism, travel and entertainment for their growth are experiencing significant disruptions emerging markets and developing economies face additional challenges face setbacks and flows At the same time, they face weaker health systems and much less fiscal space to support their economies, so for the first time since the Great Depression, both advanced and emerging economies Emerging and developing economies are in recession for 20/20 growth and advanced economies are projected at -6%.

Emerging market and developing economies that typically have normal growth levels well above advanced economies are also projected to have negative growth of minus 1 percent and minus 2.2 percent if China is excluded. Per capita income is now projected to contract in more than 170 countries now that we are projecting recoveries for both advanced and emerging and developing economies in 2021, but that is again partial. Now what I have described is a baseline scenario, but given the extreme uncertainty around the duration and intensity of health crises, we are also exploring alternative scenarios more adverse to the pandemic. It may not recede in the second half of this year, leading to a longer period of containment, worsening financial conditions and greater failures in global supply chains in those places.

Global GDP will fall further, by an additional 3% in 2020 and if the health crisis continues into 2021, it may reduce the level of global GDP by an additional 8 percent compared to the baseline. We now turn to what are the important policy actions that countries should take first on the health front. This crisis, which then allows for a resumption of economic activity in the sense that there is no trade-off between saving lives and saving livelihoods, countries must continue to generously support their health systems, conduct widespread testing and refrain from imposing trade restrictions to medical supplies. A global effort. We must ensure that when therapies and vaccines are developed, both rich and poor nations have immediate access now while the economy is paralyzed, policymakers will need to ensure that people can meet their basic needs and that businesses can recover once the acute phases of the crisis end.

Passing the pandemic The large, timely and targeted fiscal, monetary and financial policies already adopted by many policymakers have been a lifeline for households and businesses. This support must continue throughout the containment phase to minimize the lingering scars that could arise from investment moderation and job losses during this deep recession. We must also plan for recovery as containment measures emerge. Policies should change quickly to support demand. Encourage hiring and repair of balance sheets in the public and private sectors to help recovery. Coordinated fiscal stimulus among countries that have fiscal space will now be magnified. The benefits to all economies of a moratorium on debt payments and debt restructuring may need to continue during the recovery phase now that multilateral cooperation is vital to the health of the global recovery to support necessary spending in Developing countries, bilateral creditors and international financial institutions should provide concessional financing grants and a collaborative effort for debt relief to ensure that the world does not struggle to localize so that recovery does not be harmed by greater productivity losses at the International Monetary Fund we are doing our part, we are actively deploying a trillion-dollar loan capacity to support vulnerable countries, including through a rapid dispersion of emergency financing and relief of debt service for our poorest member countries, and we are asking official creditors to do the same now that there are some hopeful signs that this serious health crisis in the countries is managing to contain the virus. use social distancing, testing and contact tracing practices, at least for now, and treatments and vaccines may be developed sooner than expected, but in the meantime we face tremendous uncertainty about what comes next, according With the scale and speed of crises, national and international policy responses must be large, rapidly deployed, and quickly recalibrated as new data becomes available.

The brave actions of doctors and nurses around the world must be accompanied by policymakers so that we can overcome crises together. Thank you so much Geeta, thank you all for joining us again. We have a series of questions that have already come to us. Come on, maybe start with some questions here and then again. I encourage you to keep submitting those questions, so the first question I have is from Phil Aldridge from The Times of. London, the question you have is that this is the deepest recession since the Great Depression of the 1930s, but how deep was that to clarify the comparison and will countries be left with dangerously low levels and high levels of debt, we will need see a period of high debt levels? taxes once the crisis is over to return them to sustainable levels during the Great Depression, so if we look at the period between 1929 and 1932 for advanced economies, the contraction was around 16% and in this recession we are now seeing the contraction For advanced economies, the projection is around 6%, so clearly the magnitude of the collapse was much worse during the Great Depression.

Now, in global terms, global production, of course, the data was more scattered at that time during the Great Depression, but the numbers exist. This is a contraction of around 10% globally and right now we have a projected contraction of around 3%. This crisis requires a little action from governments and that means spending in the health sector, in businesses and in households, and that can be quite substantial, from what we are projecting. debt levels will increase quite significantly over the next 12 months, the question is what will happen now because we have a recovery that we are projecting for 2021, our debt levels relative to GDP will stabilize in the future and the question is how reduce that or How is that financed?

As long as interest rates remain very low as we are seeing and we get the recovery we are projecting, then the combination should help reduce debt levels slowly over time. Now there will be some countries in the world that would need help, foreign help, you know, debt restructurings, but we will have to see what that looks like once we get out of this pandemic. Thank you. I have a question here from Eric Martin at Bloomberg and the question is in the report. World Economic Outlook only considers negative alternative scenarios, not positive ones, and it is a sign of the times we live in when things are expected to go bad and can only get worse from here.

Question I think the best description of the sign of our times is the tremendous uncertainty about future prospects, downside risks prevail at the moment if you look at events around the world, of course that says there could be positive news that they could be new, that new therapies are being developed very quickly and that things could improve a lot, but it is true. Now, as we see it, downside risks prevail, so we have explored the scenario in which the pandemic, instead of receding in the second half of this year, which is what is assumed in the baseline, will continue and, even worse, that there will be outbreaks in 2021 if that happens. there can be a substantial new impact on global growth, thanks Gita, so let's move on to Delphine 2a: what are you asking the AFP?

What are the Fund's recommendations for governments to ensure a strong recovery when the pandemic ends, especially for advanced economies? The strength of recovery. Firstly, a lot will depend on what governments do now during this period of containment, so it is very important that during this period of containment governments provide the necessary economic support so that households can cover their expenses from businesses to avoid preventing them from going bankrupt and exiting the market, so those measures are very essential along with of course important health measures to demonstrate that they really contain the virus once the recovery occurs and we are past the pandemic phase for the economies advanced economies, it would be essential to undertake broad-based fiscal stimulus and this would be even more effective if coordinated among all advanced economies in the world, so it would be an important step, monetary policy of course should be data-driven and if inflation is holding up well, because it isbelow Interest rate targets should also remain low for that period of time and taking into account that we have lived through this crisis, it is very important to prepare and prevent something like this from happening again, so this would require building hellish systems in everyone. share even more knowledge and be better prepared next time thank you so I'll move on now to some region specific questions the first ones are about Asia so this is a shang-chi question so the question is China is gradually resuming normal economic activity China will continue to be influenced by supply and demand disruptions from the rest of the world due to containment measures.

How does the Fund assess this as an impact on Qin China's economy, given this factor? Will China be the recovery? more U-shaped or V-shaped, as China was the hardest hit in the first quarter when it was the epicenter of the pandemic in the second quarter, containment measures began to emerge towards the end of the first quarter and So we are seeing signs of recovery, but again we must bear in mind that the rest of the global economy is now in the grip of the pandemic and that there are severe containment measures around the world, which would have a large negative impact in terms of demand. external on China's growth I would like to bring Manhart here if I wanted to add something to this question mark.

Good morning everyone, yes, I think the Chinese are used to, as you pointed out, Gaeta, the contraction and the activity of the first quarter. It is expected to be quite severe, but it is important to recognize that there are signs of normalization now that the economy is getting back up and running. It is a very gradual normalization. The economy has policy space to support recovery as the pandemic spreads to other regions. Especially the important trading partners there, there will be strong global obstacles to China's recovery, but overall, with the momentum the economy had going into this crisis and the political space the economy has, we believe it is poised to post positive growth. , albeit modest, relative to the strong growth rates we have been used to seeing in the Chinese economy in the past, so now I have another question about Asia. is from the daily republic in Nepal in Nepal, how do you see the economic consequences of kovat 19 in low-income or poor countries like Nepal?

What recommendations do you have for low-income countries to revive their economy after the health crisis subsides? In developing countries, the challenges of this crisis are multiple, on the one hand, they have to deal with health crises with health systems that are not as strong as in the advanced world, they have less fiscal space to make the type of spending which is required now in For a country like Nepal, where tourism is a major source of income, this is a great success because one of the most affected sectors during this crisis is tourism, hospitality and entertainment. What should countries like about this?

I believe that at this time it is important to do everything necessary on the health front to ensure that the necessary spending is made. It is also very important to support your workers, now many others in the informal sector who would require the use of mechanisms such as cash transfers using digital payment systems. countries that have those to reach daily wage workers and at the same time support small and medium-sized businesses so that once this pandemic is over and there is a resumption of global activity in all parts of the world that these countries They can also improve.

I would also like to mention that for low-income countries that have high levels of debt burden, it is very important that creditors around the world, official creditors around the world, step up and provide service relief. Of the debt. All countries are fine so I'm going to change regions and move on to a series of questions that we have received about Europe, so the first question comes from Lupino in France and the question is: I would like to know why the 2020 recession that you are predicting . the euro zone is worse for that region than other regions, there are a number of variables involved there, so one of course is if, for example, you compare the euro zone figures with what we have for the US .U.S., now the eurozone started with even lower projected growth. in 2019 compared to the US and that's why the numbers seem much lower now, although the revisions are roughly in the same ballpark, plus compared to many other parts of the world, its area, Europe has been greatly affected by this crisis. and that is also another factor that plays an important role.

I would like to bring John Maria here to see if he would like to add anything. No, I think he's already touched on the main topic, it's really gravity. of the epidemic and in a sense we are in a position where we now see the pandemic slowing down in Europe, but we are a little bit ahead of where other countries are unfortunately heading, so we have really seen the worst blow to global activity and that is fully reflected in our current forecast, that is the main reason why the comparisons are relatively pessimistic with other regions of the world, so Europe is a very open country.

European countries are very open to international trade. Many of them, despite their size, are quite dependent on them. As for tourism, these are all sectors that are greatly affected by the crisis. Thank you very much, greeting Anja María, so I have another question about Europe from our colleagues at our John's France Presse. The question is, given the huge increase in debt and deficits, how are you concerned about future growth potential, especially for Italy, Spain and France? Do you know this crisis? We first have to start by reminding ourselves that this crisis is truly a burnout, a shock, and requires countries to step up and make the necessary spending. in the health sector for companies for people, so deficits are required, what this would look like in the future depends a lot on the interest rates at which countries borrow and the interest rates at which they would have to renew now in the euro In this area, the substantial support provided by the ECB on this front is helping to keep borrowing costs low for many countries, including Italy and Spain, and while that is the case, once there a recovery, we should see these debt levels come down now.

Of course, there is tremendous uncertainty about this crisis, there could be much worse outcomes, there could be much greater vulnerabilities across the board, including the banking sector, and we have to be attentive to that, thanks Gita, so another question about Europe and this. is in the UK, so how is the UK's economic response compared to other nations? Would you encourage the UK Treasury to do more to support businesses in the economy? This is from Sky News' Michael Blair. The UK has taken a very aggressive approach. We have put forward important, substantial, very carefully targeted measures, so they have done all the right things.

At this time, considerable support to forms, to households and to the financial system. I'd like to bring it here in January if you'd like to add anything. I know there has been a very powerful response from both the Treasury and the Bank of England. This is absolutely essential to allow the economy to restart. I would also like to refer to something that Geetha said earlier in her opening remarks: we need the government to have responded. very aggressively as they should, they must also be very agile and able to adjust their response to the changing environment, as you know we are learning new things about how the epidemic spreads, how long it will stay with us and policies must be adjusted accordingly, thank you Jo Maria, so I'm going to switch back here and this is a question about the OPEC deal and its impact on oil producing countries.

The question is how the OPEC agreement changes its view on the MENA region and Russia sees the oil price collapse that we have seen recently as a combination of the sharp drop in demand arising from this coronavirus crisis and also the failure of the OPEC plus negotiations, of course, it is shameful for the benefit of the world that we have much less volatility. As for oil prices, in order for these markets to remain more stable, we assumed in our projections that the price of oil would be around $35 by 2020 and around that level by 2021 and then rise back to $45, so which is still far below the crisis we foresee.

I saw it before and that has a major impact on countries that are oil producers, so I'll bring John Maria back in if you want to comment on Russia and Mina, yes, obviously the main factor that has been driving down oil prices. has been the collapse of demand for oil as transportation, you know, automobile transportation and especially air travel has declined very, very dramatically and the world was rapidly running out of storage space to store the oil that was being produced but not consuming, obviously, so the reduction The promised reduction in supply will help stabilize the market, but the forecasts we currently have are based on a trajectory of all prices that is quite similar to what is currently seen in prices of futures for oil exporters.

Obviously, weak oil prices imply a tax cut. Therefore, income is lower, whether it is lower spending by the government, lower support for non-oil sectors, lower income flowing into that sector improves lower growth; On the other hand, of course, redistribution favors oil importers, but the risk is that vulnerable oil exporters will be forced into very drastic reductions in aggregate spending and demand and that could affect global economic activity. Thank you Joe Maria, so I'm going to change regions again and thank you again for submitting your questions and moving on now to this hemisphere, the Americas. First I have a couple. questions about the US, first from Barry Wood and then from David Lynch of the Washington Post.

The first question is for the US, what kind of recovery do you expect next year? Could it be a V-shaped or U-shaped recovery or U-shaped recovery or even a U-shaped recovery? tick and expect it to reach pre-crisis levels by the end of the year or early 2021 and then David Lynch's second US question, what are the implications for post-crisis growth rates of the huge rise in that that are being adopted in the US and other advanced economies. The projection in terms of the baseline is that growth will contract by 5.9 percent in 2020 and then grow by 4.7 percent in 2021.

Now, if we add them up, what that tells us is that we are projecting in terms of levels of economic activity that will continue to be lower. The previous trend, even in 2021, we think is very unlikely to return to the trend by the end of 2020. Now of course, if there was more positive news, it would come very quickly, we could see big changes and in 2021 things could be top. better than what we have but this is a deep recession it is a recession that involves solvency problems it is depressing it implies that unemployment rates increase dramatically and these tend to leave scars and although many very strong political actions are being taken, some of These debt issues will extend until the end of the second half of this year in 2021.

There has been considerable fiscal expansion, as is required at the moment, but again in the United States. is capable of borrowing at very, very low rates. We've had this experience before, when during global financial crises there was a huge increase in debt in the US, but that quickly fell in terms of GDP ratio once the crisis hit something similar. If this happens this time, there could be an increase with the kind of growth projections we have and the types of interest rates that are expected in the future. We could see an improvement in the debt trajectory once the recovery begins.

Thanks Gita, so hang in there. the region this is a question from Luis Fernando Silva Rosa from TV Globo from Brazil the question is the IMF projects that Brazil will grow 2.9 percent in 2021 this growth is below that of other countries in the region such as Chile and Peru why the IMF They consider that Brazil will grow less than other Latin American countries and the second question is: does the IMF recommend that Brazil continue with its economic reforms regardless of the economic impact produced by Kovat 19? Brazil has been hit by multiple shocks, so it has been hit by the collapse of commodity prices, it has been affected by the slowdown in global growth, especially in its trading partners, including China recently and, of course, the epidemic in Brazil itself is causing serious internal disturbances, so all these factorsThey combined to produce the estimate that we have economy.

In terms of economic reforms in Brazil, again they are important from a medium-term perspective, but at this point, of course, the priority, as in all countries in the world, is to deal with this pandemic crisis, let's see if Joe and Maria would like add something. Yes, just a couple of very brief things. One is, of course, something that Geetha emphasized in her opening remarks: that we emphasize on the wheel, we have extreme uncertainty about the forecasts, what we are talking about really, an unprecedented crisis for economic forecasts is already a pretty big deal. complicated under normal conditions.

In these times and circumstances with a lot of uncertainty coming from factors completely unrelated to pure economics, the problem is magnified. It should also be taken into account when evaluating how a country does, the importance of the external environment and the importance of what was happening in the country before, so we must keep in mind that Chile and Peru were countries that had an economic performance stronger to begin with, the size of the revisions are actually relatively similar and of course we are very hopeful that we are wrong, we are very hopeful that the recovery is going to be stronger than what we currently predict that science will find solutions to this crisis that will allow economic activity to restart sooner than we currently anticipate and with more force than we currently anticipate thank you, so we are approaching the end of In this broadcast I still have a couple of questions, one more generally about Latin America, but it can also be applied to other regions of the world and bear with me, I am translating this from Spanish, to what extent do you limit inequality and informality?

The effectiveness of government actions in Latin America, that is the question that I just received by fax, like informality makes it much more difficult for any country that has to deal with these crises, so if we look at how develops this crisis, the main sectors that are affected due to the containment measures that exist are, you know, entertainment, hospitality, transportation and several of them have very high levels of small and medium-sized companies that make up these sectors and a very large fraction Of them are informal workers, especially in the developing and emerging world, Being able to confront this crisis and get assistance to the people who need it most can be a particular challenge in these times and in countries that have a great informality, so this is where you have to think outside the situation.

The countries in the table have social assistance programmes, they should widen their reach, they should make it more unconditional, so use the existing schemes in these countries to make sure you reach these people and have money in your hands as soon as possible. possible and this is a crisis that unfortunately seriously affects the poor, those who receive daily wages and, therefore, we must think about transfers that are both in kind and in cash, expand the scope of existing plans, make them more unconditional , so these are the things that help Thanks Gita. I'm answering a couple of questions here.

There are more generalities about globalization. The first is from Marlon Shank of Xinhua. With medical supplies in short supply, some countries have implemented export restrictions. Do you think the Kovat 19 pandemic is leading? to growprotectionism, are you worried about the damage it could cause and then, in the same vein and employ from the business standard in India, ask if the Cova 19 pandemic has the potential to reverse globalization, at least partially, what could be the ramification of that? It is truly essential that all countries refrain from imposing restrictions on exports of medical supplies, and this is what you know, one of the many areas where global cooperation is necessary.

This is not the time to restrict trade in essential medical supplies and equipment. The world knows, these are difficult times in terms of globalization to deal with this pandemic. There has been a restriction on people's travel around the world due to the fact that people cannot go to work in factories. There has been a global collapse. supply chains, so this is a result of this crisis that we are seeing, but it is very important that this does not become a feature where we reverse all the benefits that we have obtained from globalization. Now the world means a healthy recovery, it means a strong recovery and that will not happen if the world globalizes because that will severely reduce productivity in the world and that is the last thing we want right now.

I would like to thank our speakers today, Geetha jam'iyyah Maher, who joined us. remotely and also thank you for joining us and hoping that you are well and staying safe thank you very much