Global economic recovery is going to be slow as long as the COVID-19 pandemic continues uncontrolled, International Monetary Fund (IMF) Chief Economist Gita Gopinath has said.
She has, therefore, called for multilateral efforts to contain the virus.
In a remote video interview with Xinhua, Gopinath said economic outcomes in the second quarter had been less dire, and that global recovery should be strong in the third quarter even though the momentum could slow down after that.
“We are still living with the pandemic in many parts of the world.
“That is going to slow the recovery because especially contact-intensive services sectors will not recover fully as long as the pandemic is not under control,” Gopinath said.
In its latest World Economic Outlook (WEO) report, the IMF projected that the global economy would contract by 4.4 per cent in 2020, 0.8 percentage point above the June forecast.
In spite of the upward revision, Gopinath said the ascent out of this crisis could be “long, uneven, and highly uncertain”.
There remains tremendous uncertainty around the global economic outlook, according to the WEO report, which highlighted downside risks such as the resurgence of the virus, growing restrictions on trade and investment, as well as rising geopolitical uncertainty.
“We are very concerned about possible second waves,” Gopinath told Xinhua, adding: “And if indeed there is a serious second wave, which leads to much more widespread containment measures and lockdown, then that certainly will be a big downside risk to our forecast.”
Gopinath, who said that trade tensions were a major concern, noted that had been an issue even before the pandemic.
The IMF chief said that the WEO report indicated that global trade volume “is on track to shrink by 10.4 per cent this year, followed by an 8.3-per cent rebound next year, which seems to be in line with weakened global demand”.
She observed that trade restrictions so far have not been an important factor in the contraction of global trade.
The IMF chief economist, however, identified trade tensions as one of the big downside risks going forward.
“You could have worsening trade tensions and investment tensions and technology tensions, and that can certainly be a hit to the global recovery.
“Countries have to be very careful not to turn protectionist, and to work closely with other countries,” Gopinath said.
According to her, it is also important to reform the global trading system, with much work needed to modernise the multilateral-rules based World Trading Organisation.
According to the WEO report, China’s economy is expected to grow by 1.9 per cent in 2020, 0.9 percentage point above the IMF’s June forecast, making it the only major economy that will see positive growth in 2020.
Gopinath explained that the upward revision for China resulted in part from a better-than-projected performance in exports.
“The demand for medical equipment and for office equipment to work from home, that’s been high. And China’s exports have gone up because of that,” she said.
A second factor, according to her, is the strong stimulus from public investment in infrastructure.
“That also surprised on the upside,” she added.
The IMF chief economist, however, noted that the recovery in China, like many other economies, is “somewhat unbalanced,” with a slower recovery in consumption than public investment and some other sectors.
“Our view is that going forward, fiscal policy will have to pivot towards away from public investment, but towards provide supporting household incomes and social safety nets so that the recovery becomes much more private demand driven as opposed to kind of public spending driven,” Gopinath said.
Commenting on China’s role in global recovery, Gopinath told Xinhua that growth in China — a major economy — has “spillovers,” especially to its neighbours.
She said, “through global trade, China is obviously playing an important role in supplying much-needed medical equipment.”
Meanwhile, Gopinath warned that China could also be under risks if there is “continued weakness in the global economy”.
She underscored the importance of the recovery of the global economy.
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