## The Path Forward: The Global Economy

_IMF News, June 3, 2020_

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**Canonical URL:** [The Path Forward: The Global Economy](https://www.imf.org/en/news/articles/2020/06/03/tr060320-the-path-forward-the-global-economy)

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## Bibliographic details
- Published: June 3, 2020

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### Inequality, protests, and the pandemic
- Inequality has been going up globally since the global financial crisis.
- IMF research shows that inequality damages societies and their prospects for the future.
- Past pandemics (SARS, H1N1) have been associated with increases in inequality; the current protests may be a wakeup call to prevent the world becoming more unequal and less fair.
- 2019 was a year of widespread protests with common root causes: a sense of growing inequality, lack of opportunity, and mistreatment of certain groups.

### G7, G20, and debt-relief initiatives
- Advanced economies have put in place massive fiscal measures of $9 trillion and massive monetary easing.
- Emerging markets with strong fundamentals have raised $77 billion over the last two months to cushion people and companies.
- Debt Service Suspension Initiative (DSSI):
  - 73 countries are eligible.
  - Half of them have already asked for debt service suspension.
  - Target/injection discussed: $12 billion.
  - The priority is transparency: publish data so creditors' participation can be tracked and progress assessed.
- Debt-suspension applicability and limits:
  - DSSI is for G20 official creditors (including G7, China, Saudi Arabia, other Gulf countries, India).
  - Debt suspension is not an answer for countries that do not qualify among the 73 or for countries with high debt burden where suspension alone is insufficient.
  - Where debt is unsustainable, careful debt restructuring (public and private participation) is necessary to restore sustainability and market access.

### IMF financing capacity and emergency lending
- IMF lending capacity has been expanded to $1 trillion (quadrupled since prior levels before the global financial crisis).
- Immediately before the global financial crisis the Fund had $250 billion.
- Amount already deployed: 260 billion (slightly over what was available before the global financial crisis).
- Remaining capacity: about three-quarters of the $1 trillion still available.
- Speed and scale of emergency financing:
  - Lifelines extended to 63 countries in 6 weeks.
  - The Fund has been operating at high pace ("24/7 operation") and is prepared to deploy available resources to the fullest if necessary.

### Path to reopening and recovery scenarios
- Reopening approach observed: cautious and gradual reopening where medical capacity, testing, and contact tracing are sufficiently expanded; micro measures to reduce exposure are important for businesses.
- Near-term global outlook:
  - At the end of this year, the world economy will be smaller than it started.
  - One hundred and seventy countries would be smaller in the end of the year.
  - World output faces "minus 3-percent growth" this year.
- IMF projection for 2021:
  - World growth projection: 5.8 percent next year (partial recovery).
  - Recovery characterized by high uncertainty (risk of the virus making another global round).
- Longer-term considerations:
  - International cooperation is critical — "we can't beat this pandemic one country at a time."
  - De-globalization is not judged inevitable; digital transformation tends to be borderless and can support openness.

### Policy recommendations and priorities for a resilient recovery
- Fiscal policy:
  - Continue fiscal stimulus while maintaining accountability: "spend as much as you can but keep the receipts."
  - Leverage low interest rates and available liquidity to support recovery.
- Debt policy:
  - Use debt suspension where appropriate for eligible poor countries.
  - Apply objective IMF assessments to guide debt restructuring when needed.
  - Ensure transparency in creditor participation and debt relief actions.
- Structural and social priorities:
  - Expand digital transformation and ensure inclusivity so people and countries are not left out.
  - Use stimulus to invest in a low-carbon, climate-resilient future (examples: reforestation, building insulation) that can be job-rich.
  - Strengthen social protection to reduce poverty and inequality and distribute the benefits of growth more equitably.
- Collective choice: avoid a "great reversal" and instead pursue a "great reset" to build a more united, resilient world after the pandemic.

*Source: IMF Managing Director Kristalina Georgieva, Washington Post Live, June 3, 2020.*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
- [Argentina and the IMF](http://www.imf.org/external/country/ARG/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Transcripts](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2020/06/03/tr060320-the-path-forward-the-global-economy_