Economic forecasts that already suggest the coronavirus pandemic will cause the worst economic crisis since the Great Depression might be too optimistic, according to the head of the International Monetary Fund.
“Yes, it can get worse,” IMF Managing Director Kristalina Georgieva said Monday. “It can get worse if, during the second half of the year, there is still significant lingering impact of the pandemic that forces either a return to the lockdown, to the Great Lockdown, or a very slow reopening of the economies. It can get even worse if the pandemic goes on a second round-the-world trip.”
Georgieva’s team has projected a “cumulative loss” of roughly $9 trillion around the world, as scores of countries, lacking testing capabilities to identify infected patients, have adopted aggressive social distancing tactics to slow the spread of the contagion. Yet, the unpredictability of the coronavirus complicates both those calculations and the decision-making process for governments.
“We just don’t know what is going to happen next,” Georgieva emphasized during the Atlantic Council event. “We don’t know whether the virus will make two rounds around the world. We don’t know whether vaccine and treatment will become available sooner rather than later. And, for policymakers, this uncertainty is very difficult to handle, but it is also very difficult for people.”
Those economic risks, over the long-term, are exacerbated by the surge in government spending that has occurred as national leaders try to support people whose livelihoods have been threatened by the social distancing strategy. Some analysts fear the spending could trigger a wave of debt crises, but Georgieva urged an aggressive approach in the short term.
“Very clearly, the world is building up much more debt,” she said. “It has to be done … do a much as you can, and then do a little bit more, because this is the only way for us to go through the first stage of this crisis.”
