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Covid-19 downturn not as bad as feared but crisis not over: IMF chief

WASHINGTON: Amid a flood of government spending, the global downturn sparked by the coronavirus pandemic will not be as bad as originally feared, International Monetary Fund (IMF) chief Kristalina Georgieva said yesterday, but she warned that the crisis is far from over.

"The picture today is less dire... allowing for a small upward revision to our global forecast for 2020," she said in a speech ahead of IMF-World Bank autumn meetings next week, when the IMF is due to present its updated forecasts.

In June, the Washington-based crisis lender projected a nearly 5 per cent contraction of global GDP, but results in the second and third quarters were better than expected.

IMPACT CUSHIONED

Ms Georgieva credited the "extraordinary policy measures that put a floor under the world economy" which amounted to US$12 trillion (S$16.3 trillion) in fiscal support to households and companies.

But she warned governments not to prematurely withdraw the help they have provided, since the outlook for next year is mixed and rife with uncertainties and risks.

Ms Georgieva said that after more than a million deaths, "this calamity is far from over".

"All countries are now facing what I would call the 'long ascent' - a difficult climb that will be long, uneven, and uncertain," she said.

In the United States and Europe, the downturn, though painful, was not as bad as economists feared at the outset, and China is seeing "a faster-than-expected recovery". But the news elsewhere is bad.

"In low-income countries, the shocks are so profound that we face the risk of a 'lost generation'," Ms Georgieva said.

"There is also now the risk of severe economic scarring from job losses, bankruptcies, and the disruption of education."

Low-income countries have not had the resources to spend as much to support jobs and businesses, and will need help to deal with their debt burden.

She likened the crisis to World War II when leaders "forged a better world in the worst possible moment" and called for governments to continue support for workers as long as it is needed, while spending to create a better and more equitable economic system.

"Where the pandemic persists, it is critical to maintain lifelines across the economy, to firms and workers," she said. "Cut the lifelines too soon and the long ascent becomes a precipitous fall." - AFP

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