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IMF foresees legacy scars from COVID-19 crisis

Despite the hopes of a COVID-19 vaccine emerging soon, the global economy remains on tenterhooks as new cases are surging around the world, Gita Gopinath, chief economist at the International Monetary Fund (IMF), said on Wednesday.

Observing that the world economy hadn’t returned to pre-pandemic levels yet despite a rebound in recent months, Ms. Gopinath said that the crisis triggered by the novel coronavirus was likely to scar future economic activity as companies, governments, students and the worst-hit sections of the workforce would have to cope with the pandemic’s ‘legacies’.

“The pandemic has had a tremendous cost in terms of lives and livelihoods lost. While the world economy has rebounded from the depth of its collapse in the first half of this year, we are still far from returning back to the pre-pandemic levels in almost all parts of the world,” she said in a discussion at the Bloomberg New Economy Forum.

“Indeed, there has been positive news on the vaccine front, which makes us hopeful but that said, we are right now still living through an increased spread of the virus with record number of cases in the world, and that is going to impact economic activity. We also have to keep in mind there will be many legacies from this crisis that will weigh on economic activity in the future,” added Ms. Gopinath, whose official designation at the IMF is Economic Counsellor and director of the research department.

“There will be corporates with stressed balance sheets, there will be governments with large amounts of debt. We have a generation of students impacted by loss of schooling, the job market is recovering in some places strongly, but if you look at low-income workers, women and young workers, they are very hard hit,” she said.

While there were concerns about a jobless recovery, the IMF chief economist urged countries to push for green investments as part of the recovery process as they were more job-intensive. “This has the benefit of increasing jobs, output and enabling a transition towards a growth path where you don’t have to worry about climate risks,” she said.

Tata group executive chairman N. Chandrasekaran said that the scale of India’s lockdown and the ‘accompanying recession, technically the first in India’s history, had really put the focus on getting everybody back to work’ and getting growth back in the short term.

“Literally, all hands on deck have been solely focused on getting the economy back and also avoiding a catastrophe of any kind,” said Mr. Chandrasekaran, who was also part of the discussion.

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Printable version | Jan 27, 2021 5:25:40 PM | https://www.thehindu.com/business/imf-foresees-legacy-scars-from-covid-19-crisis/article33127386.ece

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