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The International Monetary Fund (IMF) said that the global economic outlook has worsened since its latest forecast three weeks ago and the world can expect more waves of financial market turbulence.
Developing nations’ external financing needs probably will be far above the $2.5 trillion that the IMF has previously projected, chief economist Gita Gopinath said in a webcast Thursday hosted by the Council on Foreign Relations.
The fund will need all of its $1 trillion in current lending resources and isn’t being shy about telling countries how much support is needed, Gopinath said.
“We know this crisis isn’t going away anytime soon,” Gopinath said. “Things can get worse. The health crisis has not been solved.”
The IMF said in the World Economic Outlook report on April 14 that global gross domestic product will decline 3% this year. That baseline scenario assumed that the pandemic fades in the second half of this year and that containment measures can be gradually wound down, a scenario that looks less likely now, Gopinath said.
The IMF’s April outlook also sketched out three alternative scenarios in which the virus lasted longer than expected, returned in 2021 or both. A lengthier pandemic would wipe 3% off GDP this year compared to the baseline, while protraction plus a resumption next year would mean 8% less output than projected in 2021, the Fund said.
On the same webcast, Kenneth Rogoff, a professor at Harvard University professor and one of Gopinath’s predecessors at the IMF, said that some countries will face a solvency crisis and will need debt writedowns rather than just postponement of payments.
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