The International Monetary Fund on Monday said after the coronavirus outbreak the world cannot afford to take social cohesion for granted, underscoring the need for countries to calibrate their social policies to reduce inequality, protect vulnerable sections, and promote fairness in access to opportunities.
The novel coronavirus, which originated in China's Wuhan city last December, has claimed over 165,000 lives and infected 2.4 million people worldwide so far. Further it has triggered fears of a downturn, battering a number of business sectors.
In a blog post 'A Global Crisis Like No Other Needs a Global Response Like No Other' after the first-ever virtual spring meeting of the IMF and the World Bank concluded, IMF Managing Director Kristalina Georgieva said the global outlook was dire.
"We expect global economic activity to decline on a scale we have not seen since the Great Depression. This year 170 countries will see income per capita go down -- only months ago we were projecting 160 economies to register positive per capita income growth," she wrote.
The IMF managing director said policy advice will need to adapt to evolving realities to help lay the foundations for a strong recovery.
"In the new post-COVID-19 world, we simply cannot take social cohesion for granted. So we must support countries' efforts in calibrating their social policies to reduce inequality, protect vulnerable people, and promote access to opportunities for all," said Georgieva, who has served the acting president of the World Bank Group in 2019.
"We need to have a better understanding of the specific challenges, risks and tradeoffs facing every country as they gradually restart their economies," she added.
Economies across the world are looking to maintain extraordinary stimulus and unconventional policy measures. However, questions persist on how long to unwind the, dealing with high unemployment and 'lower-for-longer' interest rates, preserving financial stability, and facilitating sectoral adjustment and private sector debt workouts.
"We also must not forget about long-standing challenges that require a collective response, such as reigniting trade as an engine for growth, sharing the benefits of financial technology and digital transformation which have demonstrated their usefulness during this crisis, and combating climate change -- where stimulus to reinforce the recovery could also be guided to advance a green and climate resilient economy," Georgieva said.
"Just as we responded strongly in the initial phase of the crisis to avoid lasting scars for the global economy, we will be relentless in our efforts to avoid a painful, protracted recession," she said.
Particularly concerned about emerging markets and developing countries, the IMF managing director said they have experienced the sharpest portfolio flow reversal on record of about USD 100 billion.
Those dependent on commodities have been further shocked by plummeting export prices. Tourism-dependent countries are experiencing a collapse of revenue, as are those relying on remittances for income support.
"For emerging economies, the IMF can engage through our regular lending instruments, including those of a precautionary nature. This may require considerable resources if further market pressures arise. To prevent them from spreading, we stand ready to deploy our full lending capacity and to mobilise all layers of the global financial safety net," she added.
"For our poorest members, we need much more concessional financing. With the peak of the outbreak still ahead, many economies will require significant fiscal outlays to tackle the health crisis and minimise bankruptcies and job losses, while facing mounting external financing needs," the IMF chief said.
"But more lending may not always be the best solution for every country. The crisis is adding to high debt burdens and many could find themselves on an unsustainable path," she added.