IMF Managing Director Sounds Brighter Economic Tone

International Monetary Fund

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said in remarks prepared for delivery Tuesday (Oct. 6) that the world economy is looking better than the organization predicted three months ago.

“The IMF in June projected a severe global GDP contraction in 2020. The picture today is less dire,” she said, speaking from Washington, D.C., at an event honoring London School of Economics — her alma mater — on its 125th anniversary. “We now estimate that developments in the second and third quarters were somewhat better than expected, allowing for a small upward revision to our global forecast for 2020. And we continue to project a partial and uneven recovery in 2021.”

Other IMF officials have also sounded more upbeat in recent weeks as the organization prepares for the scheduled Oct. 13 release of its next “World Economic Outlook.”

Georgieva said her “key message” today is: “The global economy is coming back from the depths of the crisis. But 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. And prone to setbacks.”

Some countries, especially those able to provide substantial fiscal stimulus and bring significant resources to fighting COVID-19, are doing fairly well, she said, while others aren’t.

“For many advanced economies, including the United States and the Euro Area, the downturn remains extremely painful, but it’s less severe than expected. China is experiencing a faster-than-expected recovery. Others are still hurting badly, and some of our revisions are on the downside,” she said.

“Emerging markets and low-income and fragile states continue to face a precarious situation. They have weaker health systems. They are highly exposed to the most affected sectors, such as tourism and commodity exports. And they are highly dependent on external financing,” she added.

Georgieva said finial risks going forward include “rising bankruptcies and stretched valuations in financial markets.” Also, she said, “many countries” have taken on significant public debt.

Business leaders continue to call for measures to mitigate downside risks to the economy.

Early in the pandemic, World Economic Forum economists touted digital commerce as a potential tool for post-pandemic recovery.