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Global Economy Shrinking at Alarming Rate, IMF Warns

Rob Garver

   WASHINGTON - All signs are pointing to a global economic crisis of
   proportions not seen in decades in the face of the coronavirus pandemic
   crisis.

   On Wednesday, the International Monetary Fund estimated that the global
   economy would shrink by 3 percent in 2020, a slowdown 30 times worse
   than what the world experienced in 2009, when the global financial
   crisis caused growth to shrink by 0.1 percent.

   The new forecast contrasts sharply from the IMF's projections just
   three months ago, when the organization anticipated a 3.3 percent
   global economic expansion. It also comes as the United States is making
   a modest effort to prop up other countries' economies with increased
   contributions to international financial organizations such as the IMF
   and the United States Agency for International Development (USAID).

   Announcing a revision of her agency's World Economic Outlook, IMF chief
   economist Gita Gopinath said that the current crisis will be "the worst
   recession since the Great Depression" of the 1930s.

   The implications for countries that typically rely on foreign aid are
   particularly dire, the IMF said.

   "Emerging and frontier market economies are facing the perfect storm,"
   the fund said in its Global Financial Stability report.

   Even as their economies are crippled by the global shutdown, emerging
   market countries have watched as global investors shifted unprecedented
   amounts of money away from them in an effort to find a haven.

   As a result, countries already struggling to service debt will face
   possible default if international lenders do not take steps to
   restructure their loans.

   Gopinath said a massive, coordinated global response will be necessary
   to help the world economy recover.

   As part of its response, the U.S. Congress recently authorized hundreds
   of millions of dollars in additional direct foreign aid to countries
   struggling to contain the disease, and has allocated several billion
   dollars to international economic development institutions.

   But experts say that after years of under-investment in global health
   security measures, the current U.S. commitment amounts to no more than
   a "down payment" on the effort that will be needed to address the
   current crisis and to blunt the effects of future pandemics.

   U.S. leadership urged

   "This is an initial start, but we're going to need really significant
   political leadership" from the United States, said Erin Collinson,
   director of policy outreach for the Center on Global Development. "I
   certainly hope to see a greater effort on the international front from
   the U.S. moving forward," she added.

   InterAction, an alliance of global non-governmental organizations,
   issued a statement when massive economic stimulus legislation was
   passed calling for the U.S. to take the lead in a global response.

   "American leadership has proven pivotal at many times throughout modern
   history, and American leadership is needed now to combat this
   pandemic," InterAction said.

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