IMF Calls for ‘Large, Targeted Policies’ to Counter Virus
IMF Calls for ‘Large, Targeted Policies’ to Counter Coronavirus
(Bloomberg) -- The International Monetary Fund’s chief economist urged policy makers around the world to implement targeted fiscal, monetary and financial market measures to help households and businesses impacted by the coronavirus outbreak.
Central banks should be prepared to provide liquidity to banks and financial companies, especially those who lend to more vulnerable small- and medium-sized businesses, Gita Gopinath said in a blog post Monday. Broader monetary stimulus such as interest-rate cuts or asset purchases can boost confidence and support financial markets if there’s a risk of a significant tightening in financial conditions, she said.
Governments and central banks last week stepped up emergency actions, with the Bank of Canada joining the Federal Reserve in cutting interest rates by a half point. More than $54 billion in budget support has already been pledged or is under consideration in the U.S., Europe and Asia.
Broad-based fiscal stimulus can help boost aggregate demand but would be more effective once business operations begin to normalize, Gopinath said. Families and businesses could benefit from cash transfers, wage subsidies and tax relief to help them meet their needs, she added.
“There is a need for urgent action, and not just targeted policies, but substantial targeted policies,” Gopinath said in a Bloomberg Television later Monday. “In this particular case, you could think of fiscal policy as being in the driver’s seat, because that’s where you could do a lot more targeted policies.”
Read More: IMF’s Gopinath Sees Grave Costs If Virus Hits Unprepared Nations
Managing Director Kristalina Georgieva said last week that the global economic outlook has shifted to “more dire scenarios” as the virus has spread undetected and that it’s still difficult to predict the impact. The IMF is making available $50 billion to help countries deal with the virus, including $10 billion at zero interest for the poorest nations.
The IMF expects that global growth this year will be slower than 2019, when growth was 2.9%, Georgieva said last week, adding that the official forecast will be updated next month. The IMF had previously seen 2020 growth accelerating to 3.3%.
Gopinath said that Monday’s plunge in oil may be a net negative rather than a relief for the global economy as the hit to crude exporters outweighs any tailwind for countries that benefit from cheaper prices.
For the virus, global infections have surpassed 110,000, resulting in more than 3,900 deaths since the virus originated in Wuhan, China.
“It’s very important that policies respond quickly to prevent this turning into a permanent crisis,” Gopinath said in the interview. “If all goes well and the necessary actions are taken, then 2021 would see a strong recovery, but we need to move fast now.”
--With assistance from Romaine Bostick and Scarlet Fu.
To contact the reporter on this story: Eric Martin in Washington at emartin21@bloomberg.net
To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Jeff Kearns
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