Potential Impact of the Coronavirus Epidemic: What We Know and What We Can Do

IMF Blog, March 4, 2020

Source details

Canonical URL

Potential Impact of the Coronavirus Epidemic: What We Know and What We Can Do

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Authors: Kristalina Georgieva
• Published: March 4, 2020

What We Know

• The disease is spreading quickly; with over one-third of our membership affected directly, this is no longer a regional issue—it is a global problem calling for a global response.
• The epidemic will eventually retreat, but the timing is unknown: "we don’t know how fast this will happen."
• The shock affects both supply and demand:
  • Supply disruptions due to morbidity and mortality, containment efforts that restrict mobility, higher costs of doing business from restricted supply chains, and a tightening of credit.
  • Demand falls due to higher uncertainty, increased precautionary behavior, containment efforts, and rising financial costs that reduce the ability to spend.
• These effects will spill over across borders.
• Under any scenario, global growth in 2020 will drop below last year’s level; how far it will fall, and for how long, is difficult to predict and depends on the epidemic and the timeliness and effectiveness of actions.
• Experience suggests about one-third of the economic losses from the disease will be direct costs (loss of life, workplace closures, quarantines); the remaining two-thirds will be indirect, reflecting retrenchment in consumer confidence and business behavior and a tightening in financial markets.
• Financial systems are more resilient than before the Global Financial Crisis, but uncertainty is the biggest current challenge.
• Countries with weaker health systems and response capacity are particularly challenged, calling for a global coordination mechanism to accelerate recovery of demand and supply.

How to Respond at the Country Level (Policy Recommendations)

• Prioritize front-line health-related spending to:
  • Protect people’s wellbeing.
  • Take care of the sick.
  • Slow the spread of the virus.
  • Ensure production of medical supplies so that supply meets demand.
• Implement macro-financial policy actions to tackle supply and demand shocks:
  • Aim for "no regret" actions that shorten and soften the economic impact.
  • Ensure policies are timely and targeted to the sectors, businesses, and households hardest hit.
• If demand weakens broadly through confidence and spillover channels (trade and tourism, commodity prices, tighter financial conditions), provide additional policy response to support demand and ensure adequate supply of credit.
• Ensure adequate liquidity to offset financial stability risks.
• Stand ready to provide a more forceful, coordinated response if conditions require it; international cooperation (e.g., G7 readiness to cooperate on timely and effective measures) is welcomed.

How the Fund Can Help (Resources and Facilities)

• The IMF is making available about $50 billion through its rapid-disbursing emergency financing facilities for low-income and emerging market countries that could potentially seek support.
  • Of this, $10 billion is available at zero interest for the poorest members through the Rapid Credit Facility.
• The Fund has about $1 trillion in overall lending capacity.
• For low-income countries, rapid-disbursing emergency financing of up to $10 billion (50 percent of quota of eligible members) can be accessed without a full-fledged IMF program.
• Other members can access emergency financing through the Rapid Financing Instrument; this facility could provide about $40 billion for emerging markets that could potentially approach the IMF for financial support.
• The Catastrophe Containment and Relief Trust (CCRT) provides eligible countries with up-front grants for relief on IMF debt service falling due; the CCRT proved effective during the 2014 Ebola outbreak but is underfunded with just over $200 million available against possible needs of over $1 billion. A call is made for member countries to help ensure the facility is fully re-charged and ready for the current crisis.
• IMF staff are working to identify vulnerable countries and estimate potential financing needs should the situation deteriorate further.
• The Fund is fully committed to supporting member countries, particularly the most vulnerable; it states: "we have the tools to help; and we are coordinating closely with our partner institutions."

Source: Kristalina Georgieva, March 4, 2020 — Potential Impact of the Coronavirus Epidemic: What We Know and What We Can Do (IMF blog)

References

• عربي
• 日本語
• Português
• Coronavirus Economic Planning: Hoping for the Best, Prepared for the Worst
• Monetary and Financial Stability During the Coronavirus Outbreak
• Limiting the Economic Fallout of the Coronavirus with Large Targeted Policies
• Fiscal Policies to Protect People During the Coronavirus Outbreak
• Questions and Answers on the IMF’s $50 billion Rapid-disbursing Emergency Financing Facilities
• IMF Factsheet: How the IMF Can Help Countries Address the Economic Impact of Coronavirus