IMF: The Corona Crisis has Caused a GDP Gap of About 15 trillion US Dollars to be Filled
Geoffrey Okamoto, the first vice president of the International Monetary Fund (IMF), pointed out on Tuesday (20th) that the global GDP (gross domestic product) gap caused by the new crown crisis is estimated to be as high as 15 trillion US dollars. Only by implementing “difficult reforms” in the product, labor, and financial markets can this big hole be filled.
Okamoto said: “Countries are now investing a lot of effort on vaccination and recovery spending. We must use the same spirit to boost growth to make up for lost economic output. Monetary and fiscal stimulus continue to keep up, and the effect can be like a springboard. A brighter and more sustainable future. Don’t just take a cane and return to the weakened version of the economy before the epidemic.”
Okamoto said that since March 2020, governments of various countries have invested US$16 trillion in financial support, and the central bank’s balance sheet has expanded by a total of US$7.5 trillion. The size of the deficit rose to the highest level since World War II. In the past year, the global central banks provided more liquidity than the previous 10 years combined. However, these actions are “absolutely necessary.”
He emphasized that if this is not done, the worst economic recession since the Great Depression will be tripled in 2020 due to the impact of the new crown epidemic.
The main points of reform measures proposed by Okamoto include:
– Strengthen the debt restructuring mechanism, help dissolve unviable companies as soon as possible, and direct investment to new ideas and enterprises.
– Formulate stronger labor market policies, including job search monitoring and support, through “retraining” to help workers have more promising jobs.
– Improving the competition policy framework and reducing barriers to market entry are under discussion in the United States and Europe.
He believes that the implementation of these reforms in the next ten years can increase the annual growth rate of per capita GDP in emerging markets and developing economies by one percentage point.