Joint Press Conference on Covid-19 by IMF Managing Director and World Bank Group President

IMF News, March 4, 2020

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Conference with IMFC representing 189 members showed strong unity and clear commitment for coordinated action.
The outbreak is a global problem: over one-third of IMF membership affected directly.
The disease is spreading quickly, will eventually retreat, but timing and effectiveness of treatments and vaccines remain unknown.
The shock affects both supply and demand simultaneously:
- Supply disruptions from morbidity, mortality, containment measures, restricted supply chains, and tightening of credit.
- Demand falls from heightened uncertainty, precautionary behavior, containment measures, and higher financial costs.
Historical experience suggests roughly one-third of economic losses are direct (loss of life, workplace closures, quarantines) and two-thirds indirect (behavioral retrenchment and financial tightening).
Financial system is more resilient than before the Global Financial Crisis, but uncertainty defines projections.
Baseline judgment: global growth in 2020 will dip below its last year's levels; magnitude and duration depend on the epidemic’s course and policy timeliness/effectiveness.

IMF is updating projections in the World Economic Outlook update; uncertainty remains high.
The baseline scenario assuming containment largely in China is no longer valid after recent geographic spread.
China status reported by Chinese authorities: 60 percent restart of production with expectations to reach 90 percent to 100 percent in the next weeks.
Prior IMF baseline example: China growth projection reduced from six percent to 5.6 percent under the contained-China scenario; that baseline no longer holds.
Crude oil prices have tumbled by more than 15 percent since the beginning of the year, translating into some $10 billion of lost revenues across main oil exporters.
Market and policy reactions in recent days included a Federal Reserve emergency rate cut of half percent; central banks are coordinating and contingency planning is under way.

Immediate priority: ensure frontline health-related spending to protect people, treat the sick, and slow spread — "people first".
- Urgent funding for protective and treatment health products, respirators, gloves, masks, and stocking of emergency rooms/quarantine facilities.
- Global coordination mechanism to match increasing demand with supply; IMF and World Bank are stepping in to help coordinate.
Macro-financial policy actions should be "no-regret", timely, targeted, and aimed at sectors, businesses, and households hardest hit.
- Policies to support demand, insure adequate credit supply, and stabilize confidence.
- Support social protection (income for people staying home), temporary debt-service restructuring, and targeted business support.
Preserve and expand access to working capital and trade finance; policy measures should not shift resources away from working capital needs.
Central banks and authorities should focus on financial stability risks and contingency planning (e.g., operations if staff work from home).
Encourage structural and regulatory reforms that increase resilience and prospective growth — view reforms as long-term investment rather than temporary stimulus.

IMF overall lending capacity: $1 trillion.
Rapidly disbursing emergency financing available for low-income and emerging middle-income countries: up to $50 billion that does not require a full-fledged IMF program.
Catastrophic Containment and Relief Trust (for the poorest countries) currently has $200 million; IMF calls on membership to increase this capacity to respond to most vulnerable.
IMF assessing highest vulnerability using factors: weak health systems, exposure to commodity price shocks, spillover vulnerability, and limited fiscal space.

World Bank announced a $12-billion package to provide a fast, flexible response to developing-country needs.
- Composition: $6 billion from IBRD and IDA; $6 billion from the International Finance Corporation (IFC).
- IFC financing focuses on private-sector needs: trade finance and working capital (fast-acting).
Package includes technical assistance; goods and services for prevention and limiting transmission (laboratory equipment, surveillance systems, gloves, masks, portable ventilators); health infrastructure support (emergency rooms, clinical care, quarantine facilities).
Pandemic Emergency Financing Facility (PEF) may provide additional resources if triggered (capital-market financed bonds).
As of announcement, 12 countries had expressed needs; World Bank will bring virus-related operations forward in March and accelerate reprogramming of IDA resources.

China:
- Reported production restart: 60 percent with expectation to reach 90 percent to 100 percent in the next weeks.
- Earlier IMF contained-China baseline (China growth from six percent to 5.6 percent) no longer applies given global spread.
Sub-Saharan Africa:
- Identified as a high-focus area due to combinations of weak health systems, commodity exposure, spillover vulnerability, and limited fiscal space.
- IMF availability for low-income countries: up to $10 billion with zero interest rates to tap.
Oil-producing countries / GCC:
- Oil price fall (>15 percent) implies about $10 billion lost revenues across main oil exporters.
- Most oil exporters have buffers; IMF recommends using buffers while prioritizing health expenditures.

IMFC meeting was conducted and showed high mobilization and cooperation; dry run for virtual modalities was successful.
Development Committee meeting (April) expected to be virtual; focus on burden to developing and poor countries from slower growth and on rapid, responsive assistance.
IMF and World Bank coordinating closely with WHO and other partners on procurement, technical matters, and policy responses.
Emphasis on rapid, targeted action and international cooperation to shorten and soften economic impact until treatments/vaccines become widely available.

Transcript of Joint Press Conference on Covid-19 by IMF Managing Director and World Bank Group President, Washington, D.C., March 4, 2020.