Even after the novel coronavirus pandemic had been successfully defeated, or at least brought under control, low-income countries, many in Sub-Saharan Africa, will require continued financial support from the international community to overcome the economic turmoil left by the deadly bug, the Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva and Economic Counsellor Gita Gopinath argued in a joint column published on Wednesday.
“Many countries will face daunting fiscal challenges in trying to reconcile the spending required to fight the crisis with the constraints imposed by higher debt and declining revenues. Low-income countries will require continued financial support from the international community,” they wrote.
The economists argued that a full recovery from the pre-pandemic level would remain a mirage without a permanent medical solution.
“Though the world has learned to live with the virus, a full recovery is unlikely without a permanent medical solution. Lingering uncertainty about the virus and the fear of recurring outbreaks are weighing on mobility and the confidence of consumers and businesses. The availability of a vaccine, or therapies with proven success in treating COVID-19, will materially lift the global outlook,” they wrote.
The economists argued that the coronavirus pandemic is far from over, and in many aspects, is even worse than the Great Depression which began in 1929.
“In its severity, the Great Lockdown of 2020 has naturally evoked comparisons to the Great Depression, which began in 1929. But today’s crisis is truly like no other. Although it’s too early to make a definitive judgment, we can already say that the severity and speed of the declines in economic output, employment, and consumption during the Great Lockdown were far greater than at the onset of the Great Depression. In just one month, from March to April, the U.S. unemployment rate roughly tripled to 14.7 percent, a level not reached in the Great Depression for nearly two years,” they said.
According to them, even as people return to work, employment rates in many countries have not returned anywhere close to pre-crisis levels while job losses have hit younger and lower-skilled workers especially hard.
“Globally, the International Labor Organization estimates that the equivalent of 400 million full-time jobs were lost in the second quarter of 2020. And we know from recent global surveys that next to the virus itself, unemployment is people’s highest concern. The impact on global poverty is expected to be severe, with the World Bank projecting 71 million additional people falling into extreme poverty.”
IMF Managing Director Kristalina Georgieva and Economic Counsellor Gita Gopinath argued that securing a sustained recovery and emerging stronger from the Great Lockdown will require action on three fronts:
“First, the health crisis must be brought to an end—durably and everywhere. Impressive advances in vaccine development raise hopes that this objective can be achieved. Second, people need to be able to find productive jobs. This requires preventing excessive firm bankruptcies and creating an environment for job-rich growth. Finally, our future must be more sustainable and inclusive than our past. This requires policies to arrest global warming and reverse rising inequality,” they said.