File photo: World Bank CEO Kristalina Georgieva looks on during a panel discussion at the World Economic Forum (WEF) annual meeting in Davos, Switzerland (photo: Reuters)
Global growth in 2020 will decline below 2019 levels due to pressures caused by the outbreak of coronavirus, managing director of the International Monetary Fund (IMF) Kristalina Georgieva said in an article published on the IMF website.
Georgieva said that this situation affects significant elements of both supply and demand, as supply will be disrupted due to morbidity and mortality, but also the containment efforts that restrict mobility and higher costs of doing business because of restricted supply chains and a tightening of credit.
Demand will also fall, according to Georgieva, due to higher uncertainty, increased precautionary behaviour, containment efforts, and rising financial costs that reduce the ability to spend.
"But the good news is that financial systems are more resilient than before the global financial crisis. However, our biggest challenge right now is handling uncertainty," Georgieva said.
Georgieva announced that the IMF is making available about $50 billion through its rapid-disbursing emergency financing facilities for low-income and emerging market countries that could potentially seek support. Of this, $10 billion is available at zero interest for the poorest members through the Rapid Credit Facility.
Georgieva proposed that macro-financial policy actions may be required to tackle the supply/demand shocks and shorten/soften the economic impact. They should be timely and targeted to the sectors, businesses, and households hardest hit, she noted.
"In addition, generalised weakening in demand through confidence and spillover channels, including trade and tourism, commodity prices, and tighter financial conditions, would call for an additional policy response to support demand and ensure an adequate supply of credit," she added.
An adequate liquidity will also be needed to curb financial stability risks, according to Georgieva.