Transcript of April 2020 Western Hemisphere Department Press Briefing
IMF News, April 17, 2020
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- Published: April 17, 2020
Regional economic outlook
- The pandemic has produced "the worst recession economic since we began compiling national accounts in the 1950s."
- Anticipated regional growth in 2020: "less 5.2 por ciento" (quoted as "menos 5.2 por ciento en el año 2020").
- Expectation for 2021: "una marcada recuperación en el año 2021" though recovery will not fully offset 2020 contraction.
- "Lost decade" risk for 2015–2025: on average GDP per capita expected to be flat across the decade due to cumulative shocks:
- earlier decline in commodity prices and associated income losses (2015–2016).
- balance of payments adjustments in several countries (e.g., Argentina, Ecuador).
- the COVID-19 shock (2020).
- Specific country forecasts cited:
- Brazil 2020 contraction: "5.3%" (stated as "contraction of 5.3%").
- Brazil 2021 growth projection: "2.9%" (stated as "increase just 2,9% in 2020" in question; answered as 2.9% recovery next year in discussion).
Policy measures observed and recommended
- Health measures adopted region-wide: distancing, cancellation of non-essential activities, increased fiscal resources for testing, hospital beds, respirators and other medical equipment.
- Fiscal and social measures implemented: direct transfers to vulnerable households, expansion of existing programs, relaxed access to unemployment insurance, employment subsidies, tax deferrals and exemptions, temporary tax relief, credit guarantee programs to extend loan terms and enable new credit.
- Central bank actions: policy rate cuts, liquidity support, interventions in foreign exchange and financial markets to contain volatility.
- Implementation challenge highlighted: high informality in Latin America complicates targeting of government programs; governments should use all available registries and schemes to reach informal workers and firms.
- Policy guidance:
- Prioritize health response while simultaneously financing support for households, workers, and firms.
- Create fiscal space for emergency spending by cutting non-priority spending and improving spending efficiency.
- Countries with credible medium‑term fiscal plans can provide more fiscal support now by legislating future adjustments in tax and spending frameworks to ensure debt sustainability.
- Monetary policy: "there is scope to cut policy rates further in countries that have not reached zero" while guarding against capital outflows.
- Use public credit guarantees to help firms restructure and access financing.
- If crisis is transitory, use savings and borrowing capacity to support households and firms now, while ensuring solvency over the medium term.
IMF financing instruments and engagement
- IMF capacity referenced as "un billón de dólares" (noting Spanish usage in the transcript) to support members.
- Tools and actions the IMF is deploying:
- Accelerate approval of lending lines.
- Increase limits of emergency lending lines.
- Provide debt relief for poorest and most vulnerable members under the Fund’s Catastrophe Containment and Relief Trust review.
- Deploy traditional instruments: Stand-By Arrangements, Extended Fund Facility, Flexible Credit Line, Precautionary and Liquidity Line.
- Rapid Emergency Financing: 16 countries in Latin America and the Caribbean have inquired about emergency financing.
- Ongoing and imminent IMF board actions mentioned:
- Emergency credit line for El Salvador approved a few days earlier.
- Upcoming Executive Board discussion "tomorrow" on Bolivia.
- Cases to be analyzed in the coming days: Panama, Paraguay, República Dominicana, Haití, and other of the 16 countries under review.
- Mexico: Flexible Credit Line resources can be used to strengthen reserves or support the budget (instrument rules allow both uses). Mexico’s line was renewed late last year and has more than "un año y medio" remaining.
- Colombia: line was near expiry; staff noted a plan to propose renewal to the Executive Board.
Country-specific remarks
- Brazil:
- 2020 contraction "5.3%" driven by containment measures, global recession, commodity price decline, and tighter EM financial conditions.
- Slower rebound expected (around "2.9%") because of structurally lower potential growth.
- Structural priorities once emergency subsides: central bank independence, fiscal reform (including constitutional amendments), pension reform, privatization/opening-up to raise investment and productivity.
- Argentina:
- IMF staff worked with authorities on debt sustainability; a technical document was published; the government presented a debt restructuring offer recently and IMF will analyze it in the coming days.
- Argentina acted early on public health measures and implemented economic support within constrained fiscal space.
- Next steps discussed with authorities: Article IV consultation followed by a potential program.
- Ecuador:
- Facing a preexisting fragile economic situation compounded by falling oil prices and high per-capita COVID-19 incidence.
- Government has reallocated budget and introduced new contributions; requested emergency financial assistance from the IMF.
- IMF is processing rapid-disbursement support to be sent to the Executive Board "lo más rápido posible" and is working in parallel on a follow-on medium-term program to replace the prior program.
- Mexico:
- Flexible Credit Line can be used for reserves or budget support.
- Policy advice: finance health spending and support families and firms now; legislate medium-term measures today that will operate after recovery to ensure future debt has a credible repayment source.
- Panama:
- Entered pandemic from a strong pre-crisis growth position; expected 2020 contraction is less severe than many peers because of prior high growth and investment-grade status.
- Panama recently placed a bond "por un monto mayor a los 2 billones de dólares" demonstrating continued market access.
- Caribbean:
- High reliance on tourism makes the region particularly vulnerable; growth there will likely be more negative than the regional average.
- From the 16 rapid financing inquiries, "entre ocho y nueve" are Caribbean countries; IMF is working fast to disburse rapid financing and has increased the size of rapid financing instruments.
- IMF engagement with Barbados: working to increase the size of an ongoing program that was progressing well pre-COVID.
Financing needs and IMF pipeline
- Approximately "100 countries" have asked about emergency financing globally; "16" of those are from Latin America and the Caribbean.
- IMF is processing multiple emergency requests and preparing Executive Board consideration of several country cases in the immediate weeks.
Risks, recovery dynamics and social implications
- Recovery is conditional on containing virus spread; a faster and more decisive health response reduces long-term economic damage.
- Even with rebound in 2021, the pickup may not fully recover lost per-capita income from cumulative shocks of the decade.
- Social risk: IMF warned that economic stresses from the pandemic could spark social outbreaks; no particular countries singled out, but Latin America’s late-2019 social unrest underscores vulnerability to fragmentation if policies do not manage social fault lines.
- Empirical note: historical evidence (e.g., early 20th century U.S. influenza) suggests cities that acted strongly to control virus transmission had slightly better subsequent economic performance.
Key numeric values cited
- Regional 2020 growth projection: "menos 5.2 por ciento en el año 2020".
- Brazil 2020 contraction: "5.3%".
- Brazil near-term rebound cited: "2.9%".
- IMF capacity referenced: "un billón de dólares" (Spanish terminology used in transcript).
- Global emergency financing inquiries: "aproximadamente 100 países".
- Latin America and Caribbean emergency inquiries mentioned: "16".
- Panama international bond placement: "por un monto mayor a los 2 billones de dólares".
- Decade referenced as at-risk: "2015 al 2025".
- Mexico flexible credit line duration: described as renewed "a finales del año pasado" and "duran dos años", with Mexico’s line having "más de un año y medio" remaining.
Transcript of April 17, 2020 IMF Western Hemisphere Department press briefing — IMF Communications Department