You are here: Home » Economy & Policy » News
Business Standard

IMF asks G20 countries to increase fiscal spending on Covid-19 crisis

The IMF last month forecast a 2020 global contraction of 4.4% and a return to growth of 5.2% in 2021, but warned that the situation remained dire and governments should not withdraw stimulus premature

Topics
IMF | Coronavirus | Fiscal stimulus

Reuters  |  WASHINGTON 

IMF
In economies where deficits dropped by 10% of gross domestic product this year, fiscal balances are expected to narrow by more than 5% of GDP in 2021, largely due to a sharp withdrawal of relief measures, they said

By Andrea Shalal

WASHINGTON (Reuters) - The International Monetary Fund on Monday warned Group of 20 major economies that the crisis is not over and called on the United States, Britain and other countries to increase the amount of fiscal spending currently planned.

Premature withdrawal of fiscal support at a time of continued high rates of unemployment would "impose further harm on livelihoods and heighten the likelihood of widespread bankruptcies, which in turn could jeopardize the recovery," senior officials warned in a blog published Monday.

The blog, entitled, "The Crisis is Not Over, Keep Spending (Wisely)," said swift and unprecedented action by G20 and emerging market economies had averted an even deeper crisis, with G20 countries alone providing $11 trillion in support.

The last month forecast a 2020 global contraction of 4.4% and a return to growth of 5.2% in 2021, but warned that the situation remained dire and governments should not withdraw stimulus prematurely.

On Monday, it said COVID infections were continuing to spread, but much of the fiscal support provided was now winding down, with cash transfers to households, deferred tax payments and temporary loans to businesses either having expired or being set to do so by year-end.

In economies where deficits dropped by 10% of gross domestic product this year, fiscal balances are expected to narrow by more than 5% of GDP in 2021, largely due to a sharp withdrawal of relief measures, they said.

"Larger support than currently projected is desirable next year in some economies," the said in a longer report to G20 countries also published Monday. It singled out Brazil, Mexico, Britain and the United States, citing large drops in employment in these economies and projected fiscal contractions.

Democratic lawmakers and Republican President Donald Trump have been unable to reach agreement on a new stimulus package for the United States, the world's largest economy. New spending may not be agreed until early 2021, depending on the outcome of the presidential election on Tuesday.

The IMF said countries should maintain support for poor and vulnerable groups hit disproportionately hard by the crisis, as well as targeted support for viable firms to maintain employment relationships. It listed India, Mexico, Russia, Saudi Arabia, Turkey and the United States as examples.

However it warned against providing support for firms that hindered a transfer of resources from sectors that may permanently shrink to those sectors that will be expanding.

 

(Reporting by Andrea Shalal; Editing by Chizu Nomiyama and Nick Macfie)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, November 02 2020. 22:02 IST
RECOMMENDED FOR YOU
.