Group of Twenty IMF Note — Finance Ministers and Central Bank Governors' Meetings

G-20 Surveillance Note

April 15, 2020

The Following executive summary is from a note by the Staff of the IMF prepared for the April 15, 2020 G-20 Finance Ministers and Central Bank Governors' Meetings, Virtual Meeting.
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Executive Summary

COVID-19 has triggered a major health emergency and a severe economic crisis. Infections are on an upward trajectory. Millions of jobs have been lost amid essential containment measures and voluntary distancing. Emerging market and developing economies face exceptional challenges given the deteriorating global economic conditions and their less equipped health systems. The pandemic is disproportionately affecting vulnerable groups, raising the specter of a humanitarian catastrophe.

A deep global recession is expected this year and the outlook is unusually uncertain. As discussed in the IMF’s April 2020 World Economic Outlook, global output is likely to shrink by 3.0 percent in 2020. With the fallout expected to be concentrated in the second quarter and a gradual recovery expected thereafter, growth in 2021 would be significantly stronger. Nonetheless, uncertainty is exceptionally high, reflecting, in turn, the (intertwined) uncertainties surrounding the path of the pandemic, the duration and depth of necessary containment measures, and the effectiveness of policies in supporting economic activity and financial conditions, including by avoiding scarring.

Policymakers have taken forceful steps to curb the spread of the disease and limit the economic damage. Mobility restrictions have been adopted widely and efforts to adequately resource health systems are ongoing. Fiscal policy has been eased markedly in many countries to provide a lifeline to the most affected and vulnerable. The most significant fiscal actions have been concentrated in advanced economies, where recorded infections were quicker to mount. With some exceptions, emerging market and developing economies have so far relied on smaller fiscal packages, if any, reflecting comparatively delayed increases in infection rates and concerns about limited policy space and high debt. Monetary policy easing and financial sector policies have helped partially offset the tightening of financial conditions.

Joint action is essential to address the key remaining challenges. In most countries, vulnerable citizens are likely to need further support until containment restrictions can be lifted. However, the scope for governments to provide economic relief to their citizens is uneven. Many emerging market and developing countries are unlikely to be able to ensure adequate social protection through the crisis without the support of the global community. Joint action is imperative for reasons of human solidarity, and to hasten the end of the pandemic and secure a return to a healthy global economy more quickly. Priorities will differ during containment and recovery:

  • Containment measures will remain crucial until pressures on health systems abate, but to be sustainable they need to be accompanied by well-targeted economic relief. Multilateral collaboration is needed to help emerging market and developing economies secure financing to combat the epidemic and save lives, and to ensure that critical medical information and supplies continue to flow across borders to where they are needed.
  • Joint action will be warranted to reignite trade and financial flows, address the buildup of vulnerabilities and debt burdens, and support a strong revival in global demand through well-coordinated fiscal and monetary policies.

Only forceful global policy action can arrest the pandemic and secure a strong economic recovery. Working together, the G-20 can critically help put the world back on the path to strong, sustainable, balanced, and inclusive growth.

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