Global economic recovery to be slower than expected, says IMF chief

International Monetary Fund (IMF) chief economist Gita Gopinath said in an interview on Thursday (June 25) that the IMF is projecting a significantly deeper depression and slower recovery than expected in view of the coronavirus-ravaged world economy.

Her statement comes after the IMF on Wednesday (June 24) estimated a sharp contraction of 4.5 per cent for the Indian economy in 2020, a “historic low”, citing the unprecedented COVID-19 pandemic that has nearly stalled all economic activity.

“With the collapse in activity, this could dampen the recovery going forward,” Gopinath was quoted as saying by NDTV.

However, it also said the country is expected to bounce back in 2021 with a robust six per cent growth rate.

The IMF projected the global growth at 4.9 per cent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast.

In an interview to NDTV, Gopinath spoke about the importance of global cooperation in order to enhance global economic recovery and the current economic scenario in India, among other topics.

Here are a few of her statements from the interview:

“While countries might be rethinking globalising, this is a global crisis and will be solved mainly with global cooperation. In the very near term, countries may be putting restrictions on medical exports. This will subsequently require global cooperation,” NDTV quoted her as saying.

“In the case of India, growth will be slightly over 1% in 2 years. As the global economy recovers, India will recover,” she added.

The IMF chief also assured that India was still a country with a potential growth of 6% – 6.5%.

Moving on to talk specifically about India and the current scenario here, she said, “The main challenge right now is the health crisis. It (India) is a dense country and far from the international average in terms of number of beds. But, it has done really well.”

With regard to reforms implemented to tackle the economic slump, she said, “When you think of opportunities, India should have a bigger role in international trade, and that will require huge reforms. Accelerating the pace of reforms will definitely help the country,” according to NDTV.

Addressing the plight of migrant workers, who had to go back to their hometowns after the lockdown was enforced, she said, “Now, the migrant workers do not want to come back to the cities. This will be a problem.”

She also said, “The government needs to extend cash in hand to help them. Both cash transfers and in-kind transfers are required at this time. And, that will be very helpful for recovery.”

She praised Kerala’s methods in combating COVID-19 and said their ways would help in dealing with this crisis. “There’s no doubt that much more health capacity is needed. Another lesson from Kerala to learn is the strength of their local government. This is something which will help in dealing with the crisis,” she told NDTV.

Talking about the economic slump and the inconsistency in containing the virus, she said, “The reason for our downgrade is that major cities are still battling the virus and impacting the activity.

On the other hand, the IMF chief also pointed out a few good things that would come out of this epidemic. “Positive legacies that the virus will leave behind — increasing the health capacity and social security net,” she said.