## FOREWORD

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**Canonical URL:** [FOREWORD](https://www.imf.org/-/media/files/publications/weo/2020/april/english/foreword.pdf)

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### Immediate context and nature of the shock
- The world has changed dramatically in the three months since the last World Economic Outlook update.
- A pandemic scenario was previously discussed but the real-world scale and economic implications were not fully understood.
- Exponential contagion example given: "100 infected individuals become 10,000 in a matter of a few days."
- Many human lives are being lost and the virus continues to spread rapidly across the globe.
- The crisis is characterized by three distinctive features:
  - The shock is large: the output loss from this health emergency and containment measures likely dwarfs the losses that triggered the global financial crisis.
  - Continued severe uncertainty about the duration and intensity of the shock, analogous to a war or political crisis.
  - A very different role for economic policy: containment measures make stimulating aggregate demand more challenging and, for the most affected sectors, undesirable.

### Macroeconomic outlook and scenarios
- The forecast reflects current understanding of the pandemic path and public health measures required to slow spread, protect lives, and allow health care systems to cope.
- Considerable uncertainty remains about the forecast, the pandemic itself, its macroeconomic fallout, and associated stresses in financial and commodity markets.
- It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago.
- "The Great Lockdown" is projected to shrink global growth dramatically.
- A partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound.
- Much worse growth outcomes are possible and maybe even likely if:
  - the pandemic and containment measures last longer;
  - emerging and developing economies are even more severely hit;
  - tight financial conditions persist;
  - widespread scarring effects emerge due to firm closures and extended unemployment.

### Two-phase policy approach
- The crisis should be dealt with in two phases:
  - A phase of containment and stabilization.
  - A recovery phase.
- In both phases, public health and economic policies have crucial roles to play.
- Containment measures cited: quarantines, lockdowns, and social distancing—critical for slowing transmission, giving health care systems time to handle surges, and buying time for researchers to develop therapies and a vaccine.
- These measures can help avoid an even more severe and protracted slump and set the stage for recovery.

### Public health and social measures
- Increased health care spending is essential to ensure health care systems have adequate capacity and resources.
- Consider special dispensations for medical professionals on the frontlines, for example:
  - education allowances for their families;
  - generous survivor benefits.
- Improvements suggested to global public health infrastructure to reduce future pandemic risk:
  - greater and more automatic information exchange on unusual infections;
  - earlier and more widespread deployment of testing;
  - building global stockpiles of personal protective equipment;
  - protocols for no restrictions on trade in essential supplies.

### Economic policy measures and financial system actions
- While the economy is shut down, policymakers must ensure people can meet needs and businesses can resume once acute phases pass.
- Substantial targeted fiscal, monetary, and financial measures are required to maintain ties between workers and firms and lenders and borrowers, preserving economic and financial infrastructure.
- In emerging market and developing economies with large informal sectors, new digital technologies may be used to deliver targeted support.
- Broad-based stimulus and liquidity facilities can reduce systemic stress in the financial system, lift confidence, and prevent deeper contractions by limiting amplification through the financial system and bolstering expectations for recovery.
- Swift and significant actions by several central banks have been critical, averting an even sharper drop in asset prices and confidence.
- Activation and establishment of swap lines between major central banks to provide international liquidity have been of particular importance.
- The economic landscape will be altered significantly for the duration of the crisis and possibly longer, with greater involvement of government and central banks in the economy.

### Implications for advanced vs. emerging market and developing economies
- Advanced economies with strong governance, well-equipped health care systems, and the privilege of issuing reserve currencies are relatively better placed to weather the crisis.
- Several emerging market and developing economies without similar assets and confronting simultaneous health, economic, and financial crises will need help from advanced economy bilateral creditors and international financial institutions.
- For those facing large debt repayments, debt moratoria and restructuring may need to be considered.

### Multilateral cooperation and the IMF’s role
- Multilateral cooperation is key, including sharing equipment and expertise to reinforce health care systems.
- A global effort must ensure that when therapies and vaccines are developed for COVID-19 both rich and poor nations alike have immediate access.
- The international community will need to step up financial assistance to many emerging market and developing economies.
- The IMF is at the center of a stronger global financial safety net and is already actively helping vulnerable countries.
- Ten years ago, the IMF’s member countries boosted the Fund’s resources to assist financially constrained countries during the 2008-09 global financial crisis.
- The IMF is again actively engaged in supporting national-level policy efforts to limit economic damage through its lending facilities, including rapid-disbursing emergency financing.
- Members are again stepping up to further strengthen the IMF’s resources in what looks to be an even bigger crisis than the one experienced a decade ago.

### Reasons for guarded optimism
- In countries with major outbreaks, the number of new cases has come down after strong social distancing practices were put in place.
- The unprecedented pace of work on treatments and vaccines offers hope.
- Swift and substantial economic policy actions taken in many countries will help shield people and firms, preventing even more severe economic pain and creating conditions for recovery (workplaces and schools reopening, job creation picking up, consumers returning to public places).

*Source: foreword*

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_Source: https://www.imf.org/-/media/files/publications/weo/2020/april/english/foreword.pdf_