WASHINGTON (MaceNews) – IMF Managing Director Kristalina Georgieva Wednesday said her institution and the World Bank are mobilizing their resources to coordinate a global response to the corona virus outbreak, with well more than $1 trillion available for a “people first” approach to mitigation.
“The disease is spreading quickly with over one third of our membership affected directly,” she said. ”It is a global problem coming for a global response.”
Past experience shows that eventually a vaccine will be available, she said, and the challenge now is to build a “bridge” to that point.
“About one third of the economic losses from the disease will be direct costs from loss of life and workplace closures,” she said, with the indirect costs reflecting “consumer and business behavior and in tightening of the financial markets.”
Global growth will now be less this year than last year with a specific number to be contained in the next update of the IMF’s World Economic Outlook, she said. However spending on mitigating the virus, providing health care and the needed materials plus working capital for affected firms should be viewed as investment in future growth.
How far growth will fall and how long it will take to recover is “difficult to predict” and the IMF is now doing a country-by-country analysis.
The priority will be a fiscal response to “protect peoples’ well being,” to take care of the six and restrain the spread of the virus.
The challenge will be greatest in poorer countries where health systems are weak like sub-Saharan Africa and the IMF and World Bank are taking immediate steps to help.
“We are faced with a generalized weakening demand,” she said, calling for an additional policy response to support “an adequate supply of credit.”
The Fund has $1 trillion dollars available supplemented by hundreds of billions in lending capacity.
She said China has advised it currently is resuming about 60% of production capacity and hopes to get to a 90% rebound soon. But the previous baseline scenario of a containment in China is not longer the case.
It is better to central banks to err on the side of doing more than less, she said, endorsing the rate cuts already authorized in the U.S. and Canada.
The IMF-World Bank Spring Meeting, which usually pulls hundreds of finance ministers and central bank officials to Washington and other international venues will now be “virtual” which Georgieva said a “test run” conference with the membership earlier in the day showed works well, with the added advantage of a “lower carbon footprint.”