From Isaac Anumihe, Abuja
International Monetary Fund (IMF) has said it supported countries with €16 trillion to cushion the economic pressure orchestrated by COVID-19 pandemic.
This was contained in the Fund’s 2021 World Economic Outlook statement.
The IMF explained that but for its swift intervention, several economies would have suffered severe crisis.
“Swift policy action worldwide, including €16 trillion in fiscal support, prevented far worse outcomes. Our estimates suggest last year’s severe collapse could have been three times worse if not for such support. Now, because the financial crisis was averted, medium term losses are expected to be smaller, though still substantial than after the global financial crisis at around 3 per cent. However, unlike after the 2008 crisis, this time it is emerging markets and low-income countries that are expected to suffer greater scarring given their more limited policy space.
“Now, a high degree of uncertainty surrounds the projections. Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways. This could cause inflated asset valuations to unwind in a disorderly manner, financial conditions to tighten sharply and recovery prospects to deteriorate, especially for some highly leveraged emerging markets and developing economies.
“Now policymakers will need to continue supporting their economies while dealing with more limited policy space and higher debt levels than prior to the pandemic. This requires better targeted measures to leave space for prolonged support. With multi-speed recoveries, a tailored approach is necessary with policies well calibrated at this stage of the pandemic, the strength of the economic recovery and the structural characteristics of individual countries. Right now, the emphasis should be on escaping the health crisis by prioritising health care spending on vaccinations, treatments, healthcare infrastructure. Fiscal support should be well- targeted to affected households and firms, and monetary policy should remain accommodative while proactively addressing financial stability risks. Now, as a pandemic is beaten back and labour market conditions normalise, support such as worker retention measures should be gradually scaled back. At that point, more emphasis should be placed on reallocating workers, including through targeted hiring subsidies and reskilling of workers” it said.