“Our current estimate for the overall financial needs of emerging markets is $2.5 trln. We believe this is on the lower end. We do know that their own reserves and domestic resources will not be sufficient,” Georgieva said. While the IMF is yet to come out with specific projections, Georgieva warned Monday that a recession induced by the coronavirus in 2020 could be worse than that during the global financial crisis. However, she does see the global economy recovering in 2021. “In fact, there may be a sizeable rebound, but only if we succeed with containing the virus everywhere and prevent liquidity problems from becoming a solvency issue,” Georgieva said, adding that a key concern was the risk of a “wave of bankruptcies and layoffs” due to the nation-wide shutdowns announced across the world to curb the spread of the virus.
So far, over 27,000 people have succumbed to the virus. These bankruptcies and job-losses, according to Georgieva, will not only undermine the recovery but also “erode the fabric of our societies”. The IMF is also concerned about debt-laden countries and wants to engage with nations on the issue before it becomes “a big problem for them as well as for the rest of the world economy”.
