Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva said that global economic activity increased after experiencing the worst decline in history this year due to the outbreak of the corona virus pandemic (Covid-19).
However, Georgieva warned that the recovery could be disrupted and face even more challenges if the second wave of Covid-19 hit.
The statement was made ahead of the virtual meeting of finance ministers and central bank governors from the main economies of the Group of 20 (G20) on Saturday.
“We have not come out of danger,” he said in a blog post, quoted by Reuters on Thursday (07/16/2020).
To reduce the devastating impact of the epidemic on the economy, countries in the world have poured out a lot of fiscal stimulus. However, this woman said, the move had raised the already high level of debt.
He also mentioned that US $ 11 trillion of funds spent in various fiscal steps by G20 members and other countries, as well as massive central bank liquidity injections, have been able to provide a foothold on the strength of the global economy.
Unfortunately, the footing will not be strong enough if a large new wave of infection occurs. Moreover, coupled with volatility in asset prices, volatile commodity prices, increased protectionism and political instability.
“Some countries lost more jobs in March and April than were created since the end of the 2008 global financial crisis, and many of those jobs will never return,” Georgieva said.
“Loss of jobs, bankruptcy and industrial restructuring can pose significant challenges for the financial sector, including credit losses for financial institutions and investors,”
To ensure stability, Georgieva said that there would be ongoing coordination between central banks and support from international financial institutions. The regulation must also support the use of flexible capital to keep credit lines open for business, he added.
“Monetary policy must remain accommodative where the output gap is significant and inflation is below the target, as is the case in many countries during this crisis,” he said.
In a report to the G20, the IMF warned that rising protectionism and new trade tensions jeopardized the recovery.
The weak recovery itself increases the chances of disinflation and periods of low interest rates, which can damage debt sustainability and financial stability, he said.
The IMF last month cut its 2020 global output forecast, forecast a contraction of 4.9% and a recovery that was weaker than previously estimated in 2021.