## FOREWORD ## Source details **Canonical URL:** [FOREWORD](https://www.imf.org/-/media/files/publications/weo/2020/october/english/foreword.pdf) ## Other formats - [Markdown version](/-/media/files/publications/weo/2020/october/english/foreword.pdf.md) - [Structured JSON version](/-/media/files/publications/weo/2020/october/english/foreword.pdf.json) --- ### Human and economic toll - More than one million lives have been lost to COVID-19 since the start of the year and the toll continues to rise. - Close to 90 million people are expected to fall into extreme deprivation this year. - Many more have suffered serious illness; employment and labor force participation remain well below pre-pandemic levels, and many more millions of jobs are at risk the longer the crisis continues. ### Recent developments and outlook - The IMF is projecting a somewhat less severe though still deep recession in 2020, relative to the June forecast. - Revision drivers include second quarter GDP outturns in large advanced economies that were not as negative as projected, China’s return to growth that was stronger than expected, and signs of a more rapid recovery in the third quarter. - Outturns would have been much weaker without sizable, swift, and unprecedented fiscal, monetary, and regulatory responses that maintained disposable income for households, protected cash flow for firms, and supported credit provision. - The global recovery is likely to be long, uneven, and uncertain. - Emerging market and developing economies, excluding China, are projected to incur a greater loss of output over 2020-21 relative to the pre-pandemic projected path when compared to advanced economies. - Uneven recoveries significantly worsen prospects for global convergence in income levels. - Renewed upticks in COVID-19 infections have paused re-openings and led to targeted shutdowns in some places; recovery is not assured while the pandemic continues to spread. ### Policy actions to sustain recovery (near-term) - Preventing further setbacks requires that policy support is not prematurely withdrawn. - Immediate domestic policy priorities: - Continue supporting viable but still vulnerable firms with moratoria on debt service and equity-like support where possible to preserve jobs. - Prioritize crisis countermeasures and reduce poorly targeted subsidies in countries constrained by elevated debt and higher borrowing costs. - Create room for immediate spending needs and, where needed, seek help from creditors and donors through debt restructuring, grants, and concessional financing. - IMF actions cited: - Joint call with the World Bank on debt service suspension for low-income countries. - Call for reform of the international debt architecture. - Extension of funding at unprecedented speed to several member countries. ### Medium-term and structural considerations - Medium-term growth projections are released for the first time since the crisis started; uncertainty remains substantial. - Growth is expected to moderate significantly after the projected rebound in global activity in 2021. - Both advanced and emerging market economies are likely to register significant losses of output relative to their pre-pandemic forecasts. - Small states as well as tourism-dependent and commodities-based economies are particularly vulnerable. - Most economies will experience lasting damage to supply potential, reflecting scars from the deep recession and the need for structural change. - Persistent output losses imply a major setback to living standards relative to pre-pandemic expectations. - The incidence of extreme poverty will rise for the first time in over two decades. - Inequality is set to increase because the crisis has disproportionately affected women, the informally employed, and those with relatively lower educational attainment (see Chapter 2). - Loss of human capital accumulation after widespread school closures poses an additional challenge. - Sovereign debt levels are set to increase significantly even as downgrades to potential output imply a smaller tax base. - Prospects of low interest rates over a longer period, alongside the projected rebound in growth in 2021, can help alleviate debt service burdens in many countries. - To ensure sustainable debt paths, governments may need to increase the progressivity of their taxes and ensure corporations pay their fair share while eliminating wasteful spending. ### Policy priorities for stronger, equitable, and sustainable growth - Near-term support policies should be designed to place economies on paths of stronger, equitable, and sustainable growth. - Climate and green transition (see Chapter 3): - A comprehensive package: a sizable green public infrastructure push, a gradual rise in carbon prices, and compensation for lower income households to make the transition fair. - Social and human capital investments: - Expand safety nets where gaps exist to protect the most vulnerable while supporting near-term activity. - Invest in health and education, including measures to remedy losses incurred during the pandemic, to achieve participatory and inclusive growth. - Examples of recent policy innovation: - Establishment of the European Union pandemic recovery package fund. - Launch of asset purchases by emerging market central banks. - Novel use of digital technologies to deliver social assistance in places like sub-Saharan Africa. - A push for global cooperation: - Ensure innovations in testing, treatments, and vaccines are produced at scale for the benefit of all countries. - Advance purchase commitments for vaccines under trial can help spur manufacturing and should include a strong multilateral component for affordable distribution. - Continue helping countries with limited health care capacity through sharing equipment, know-how, and financial support from international health agencies. Gita Gopinath Economic Counsellor and Director of Research *WORLD ECONOMIC OUTLOOK: A LONG AND DIFFICULT ASCENT — October 2020* --- _Source: https://www.imf.org/-/media/files/publications/weo/2020/october/english/foreword.pdf_