IMF chief warns global economic crisis ‘far from over’ - GulfToday

IMF chief warns global economic crisis ‘far from over’


Kristalina Georgieva

Washington: The global economy is showing signs of bouncing back from the severe downturn caused by the global coronavirus pandemic, but a full recovery is “unlikely” without a vaccine, IMF chief Kristalina Georgieva said on Wednesday.

In a column co-authored with IMF chief economist Gita Gopinath, the officials stressed that governments should continue to support workers and businesses since the unprecedented nature of the crisis could give rise to a wave of bankruptcies and job destruction.

As lockdowns have eased and businesses around the world have been allowed to reopen, there has been a “sharp rebound of output, consumption and employment,” they said in Foreign Policy magazine.

The massive scale and speed of government support has helped cushion the blow and allowed for the initial rebound, Gopinath and Georgieva wrote.

“This crisis, however, is far from over,” they said. “The recovery remains very fragile and uneven across regions and sectors. To ensure that the recovery continues, it is essential that support not be prematurely withdrawn.”

Businesses, even insolvent firms, will need continued help to prevent destruction of millions of jobs. That could include governments taking equity in firms or providing grants in exchange for higher tax rates later, they said.

But governments will have to be cautious in how they distribute their scarce resources, and some companies will inevitably fail, especially in industries like travel that may not survive or will be curtailed in a post-pandemic world.

And, “Though the world has learned to live with the virus, a full recovery is unlikely without a permanent medical solution.”

With 128 coronavirus vaccines currently under development, there is a strong chance a solution will be found, but “we must urgently devise multilateral solutions” to ensure adequate supply and distribution, Georgieva and Gopinath wrote.

US JOB POSTINGS: US employers advertised more Jobs but hired fewer workers in July, sending mixed signals about the Job market in the wake of the coronavirus outbreak.

The Labor Department said on Wednesday that the number of US Job postings on the last day of July rose to 6.6 million from 6 million at the end of June. A year earlier, employers posted 7.2 million Job openings.

Hiring dropped to 5.8 million from 7 million in June. The number of Americans laid off or discharged fell to 1.7 million from nearly 2 million in June.

“Overall, this report confirmed a continued but decelerating recovery for the labor market,” Contingent Macro Advisors said in a research note.

The government reported last Friday that the US economy generated 1.4 million new Jobs in August, down from 1.7 million in July and 4.8 million in June. The U.S. has recovered just under half the 22 million Jobs lost when the pandemic hit the country hard in March and April, forcing businesses to close at least temporarily.

More than 2.9 million quit their Jobs in July, up from 2.6 million in June. The uptick was unusual because people are usually reluctant to leave Jobs when the Job market is weak.

Separately, China’s factory gate prices fell for the seventh straight month in August but at the slowest annual pace since March, suggesting the industries of the world’s No. 2 economy continued to recover from the sharp coronavirus-induced downturn.

The producer price index (PPI) eased 2.0% from a year earlier in August, the National Bureau of Statistics (NBS) said on Wednesday. That was in line with expectations in a Reuters poll, but the decline was more modest than the 2.4% fall in July.

The consumer price index meanwhile rose 2.4% last month from a year earlier, as expected, slower than a 2.7% annual increase in July.

China’s economy returned to growth in the second quarter after a massive coronavirus-induced contraction at the start of the year. Recent indicators, including exports data and the PMI surveys, have pointed to a sustained recovery in economic activity and manufacturing.

“In August, industrial production continued to improve while market demand kept recovering,” said Dong Lijuan, senior statistician with the NBS, in a statement accompanying the data release.

“Prices for global commodities such as crude oil, iron ore and non-ferrous metals continued to rise, driving a rebound in domestic factory-gate prices.”

PPI rose 0.3% in August on a monthly basis.

Policymakers expect economic activity and consumer demand to continue to increase as the coronavirus outbreak comes under control, but warn of risks to the outlook as some of China’s key export markets such as the United States and Europe remain in the grip of the pandemic.


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