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NEW DELHI : The global economy could be staring at a recession that is as bad as or worse than the global financial crisis of 2008 because of the Covid-19 outbreak, International Monetary Fund (IMF) managing director Kristalina Georgieva said on Tuesday, amid calls by G-20 finance ministers for greater coordinated action.

“However, we expect a recovery in 2021. To get there, it is paramount to prioritize containment and strengthen health systems, everywhere. The economic impact is, and will be, severe, but the faster the virus stops, the quicker and stronger the recovery will be," she said during her intervention at the G-20 finance ministers’ and central bank governors’ videoconferencing conclave chaired by Saudi Arabia.

IMF is expected to substantially reduce its growth estimates for most economies in its World Economic Outlook, which it is scheduled to release in April.

G-20 members have agreed to develop a joint action plan in response to the Covid-19 outbreak, which will outline the individual and collective actions that G-20 member states will undertake to contain the pandemic. “Furthermore, G20 finance ministers and governors discussed ways for stepping up coordinated efforts by bilateral and multilateral creditors to address the risks of debt vulnerabilities, especially in low-income countries, amid the Covid-19 pandemic," Saudi Arabia said.

Covid-19 has led to a serious downturn, akin to an “economic tsunami", in the global economy and the extent of economic damage caused by the pandemic will depend on the trajectory of the virus and how quickly governments respond, Moody’s Analytics said on Tuesday.

“Our darkening outlook for the global economy is struggling to keep up with the growing magnitude of the crisis. We have long been wary of the economy’s growth prospects this year and the threats to that growth, but Covid-19 has resulted in consistent substantial downgrades to the outlook," Moody’s said.

In January, prior to the Covid-19 outbreak, Moody’s expected global gross domestic product (GDP) to grow at 2.6% in 2020. With the virus now restricting travel and trade, Moody’s expects the global economy to contract by 0.4%. The company’s rating arm, Moody’s Investors Service, has pared down India’s GDP forecast twice within a month to 5.3% for 2020, saying an extensive and prolonged slump caused by the Covid-19 outbreak will reduce growth in Asia’s third-largest economy.

“While our baseline outlook has also turned quickly more pessimistic, the recession that now engulfs the world ultimately should not be as severe as the financial crisis nor, certainly, as terrible as the 1930s’ Great Depression. However, the scenario that comes to pass will depend critically on how effective global policymakers are in containing the virus and responding to the economic fallout," it said, striking an optimistic note.

The IMF chief appreciated the extraordinary fiscal actions many countries have already taken to boost health systems and protect affected workers and firms, and welcomed moves by major central banks to ease monetary policy. “Even more will be needed, especially on the fiscal front," she said. Advanced economies are generally in a better position to respond to the crisis, but many emerging markets and low-income countries face significant challenges, Georgieva said. “Investors have already removed $83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded. We are particularly concerned about low-income countries in debt distress, an issue on which we are working closely with the World Bank," she said.

IMF is focussing on bilateral and multilateral surveillance of the crisis , and stepping up emergency finance to nearly 80 countries. “We stand ready to deploy all our $1 trillion lending capacity and we are looking at other available options," it said.

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