Facing the twin task of fighting the coronavirus pandemic today and building a better tomorrow, the world is experiencing a new Bretton Woods moment, IMF Managing Director Kristalina Georgieva said on Thursday.
Addressing the annual meeting of the International Monetary Fund’s Board of Governors, she said that what was true at Bretton Woods, when allies at the end of World War II gathered for a conference to create the institutions that would use economic cooperation to prevent future conflicts, remains true today.
“Today we face a new Bretton Woods moment. A pandemic that has already cost more than a million lives. An economic calamity that will make the world economy 4.4 per cent smaller this year and strip an estimated USD 11 trillion of output by next year. And untold human desperation in the face of huge disruption and rising poverty for the first time in decades,” she said.
“Once again, we face two massive tasks: to fight the crisis today and build a better tomorrow,” she said.
Prudent macroeconomic policies and strong institutions are critical for growth, jobs and improved living standards, she said.
Strong medium-term frameworks for monetary, fiscal and financial policies, as well as reforms to boost trade, competitiveness and productivity can help create confidence for policy action now while building much-needed resilience for the future, she added. “We know what action must be taken right now. A durable economic recovery is only possible if we beat the pandemic. Health measures must remain a priority. I urge you to support production and distribution of effective therapies and vaccines to ensure that all countries have access,” Georgieva said.
She urged countries to continue support for workers and businesses until a durable exit from the health crisis.
“We have seen global fiscal actions of USD 12 trillion. Major central banks have expanded balance sheets by USD 7.5 trillion. These synchronised measures have prevented the destructive macro financial feedback we saw in previous crises,” she said.
“But almost all countries are still hurting, especially emerging market and developing economies. And while the global banking system entered the crisis with high capital and liquidity buffers, there is a weak tail of banks in many in emerging markets. We must take measures to prevent the build-up of financial risks over the medium term,” she said.The IMF expects 2021 debt levels to go up significantly – to around 125 per cent of GDP in advanced economies, 65 per cent of GDP in emerging markets; and 50 per cent of GDP in low-income countries, Georgieva further said.
