IMF: Economy 'losing momentum' amid virus second wave

Image source, Getty Images

The global economic recovery may be losing momentum as coronavirus infections surge again, the International Monetary Fund has warned.

Fund chief Kristalina Georgieva said more economic help is needed, and warned countries against withdrawing aid too soon.

Recent progress towards a vaccine has raised hopes of a return to normal.

But despite those steps, "the economic path ahead remains difficult and prone to setbacks," she said.

The IMF has predicted the world economy will shrink by 4.4% this year in the worst annual plunge since the 1930s. It expects growth of 5.2% next year, but said recovery is likely to be "partial and uneven"

Except for China, economic activity next year is likely to remain below 2019 levels in most major economies, the IMF said in prepared for this weekend's upcoming summit of the G-20 nations.

Growth could slow further if countries must maintain social restrictions for longer than expected, it added.

"The resurgence in infections in many economies shows just how difficult and uncertain this ascent will be," . "That is why we need continued strong policy action."

Image source, AFP

Image caption, Kristalina Georgieva says countries must coordinate stimulus plans

To date, the economic rebound in many counties, including the US, Eurozone and Japan, has been stronger than many expected, despite the loss of tens of millions of jobs.

But the IMF warned that future growth may be threatened as the pandemic leaves scars, such as disrupted schooling and deeper inequality.

It also said that a disconnect between financial markets and real economic activity poses risks to financial stability, while higher debt levels may make future investments more difficult.

Governments around the world have already spent an estimated $12tn responding to the crisis.

Ms Georgieva said more is necessary and called on countries to coordinate stimulus plans to make their efforts more effective.

Her comments come as talks in the US over further stimulus efforts remain stalled, allowing support programmes for businesses and unemployed workers to expire. In Europe, disagreements between members have also placed at risk a recovery fund.