Transcript of April 2020 World Economic Outlook Press Briefing

IMF News, April 14, 2020

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Baseline projection: global growth in 2020 to fall to minus 3 percent.
Baseline projection: global growth in 2021 to rebound to 5.8 percent.
Downgrade from January 2020: 6.3 percentage points.
Cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9 trillion.
Income per capita is projected to shrink for over 170 countries.
Alternative adverse scenarios:
- If the pandemic does not recede in the second half of 2020, global GDP could fall an additional 3 percent in 2020.
- If the health crisis rolls over into 2021, it can reduce the level of global GDP by an additional 8 percent compared to the baseline.

The IMF describes the shock as "the great lockdown" and "the worst recession since the Great Depression."
Great Depression contractions cited:
- Advanced economies: contraction around 16 percent (1929–1932).
- Global output: contraction about 10 percent (estimates noted).
Current advanced-economy projection for 2020: minus 6 percent.
Current emerging market and developing economies projection for 2020: minus 1 percent (and minus 2.2 percent if you exclude China).

United States:
- Projected contraction in 2020: 5.9 percent.
- Projected growth in 2021: 4.7 percent.
- Level of economic activity projected to remain below pre-virus trend in 2021.
China:
- First-quarter contraction severe; signs of gradual normalization by end-Q1 and into Q2.
- Projection: poised to register positive growth in 2020, but modest relative to past strong growth rates.
Euro Area:
- Projected 2020 outcome worse than many regions due to pre-crisis lower growth, severe epidemic impact, openness to trade, and reliance on tourism.
- Specific country concerns noted for Italy and Spain given increased debt and vulnerability.
Brazil and Latin America:
- Brazil projected to grow 2.9 percent in 2021 (subject to discussion of multiple shocks: commodity price collapse, slowing global growth, domestic epidemic).
- Latin American challenges: informality and inequality limit policy reach; tourism-dependent economies (e.g., Nepal) face severe hits.
Oil exporters and MENA / Russia:
- IMF assumption: oil price around $35 for 2020 and around that level for 2021, then back up to $45.
- Lower oil prices imply lower fiscal revenues for exporters, risk of drastic reductions in aggregate spending, and negative spillovers to global activity.

Immediate/containment phase:
- Priority on health measures: flatten the spread via lockdowns, testing, contact tracing; refrain from trade restrictions on medical supplies.
- Continue large, timely, and targeted fiscal, monetary and financial policies to support households, firms, and financial markets.
- Support should continue throughout the containment phase to minimize persistent scars from subdued investment and job losses.
Recovery phase:
- As containment eases, policies should shift swiftly to supporting demand, incentivizing hiring, and repairing balance sheets in private and public sectors.
- Fiscal stimulus coordinated across countries with fiscal space will magnify benefits.
- Moratoria on debt payments and debt restructuring may need continuation during recovery.
Debt and financing:
- Debt levels projected to rise significantly over the next 12 months; debt-to-GDP levels expected to stabilize as recovery unfolds, conditional on low interest rates and effective recovery.
- Some countries will require external aid, debt restructuring, and concessional financing.
- IMF capacity deployment: actively deploying $1 trillion lending capacity to support vulnerable countries, including rapid-dispersing emergency financing and debt service relief to poorest member countries; call on official creditors to do the same.
Monetary policy:
- Data-driven; if inflation remains well below targets, interest rates should stay low to support recovery.

Informality and inequality reduce effectiveness of government measures in many emerging and developing economies.
Recommendations for low-income and highly informal economies:
- Prioritize health spending.
- Use cash transfers, digital payment systems where available, and broaden/unconditionalize existing social assistance to reach informal and daily-wage workers.
- Support small and medium enterprises to preserve capacity for post-pandemic recovery.
- Call for official creditors to provide debt relief to highly indebted low-income countries.

IMF calls on countries to refrain from export restrictions on medical supplies and essential equipment.
Concern that pandemic-induced travel restrictions, supply-chain breakdowns, and trade limits could foster deglobalization, which would reduce productivity and damage the recovery.

Extreme uncertainty around epidemiology, containment effectiveness, development of therapeutics and vaccines, and the interaction of health, financial, and commodity shocks.
Downside risks currently prevail; upside outcomes possible if treatments/vaccines arrive sooner than expected.
Policymakers must be large, rapid, and nimble in responses and ready to recalibrate as new data arrives.

Transcript of April 2020 World Economic Outlook Press Briefing — IMF Communications Department