'Exceptionally difficult': Coronavirus could force 7.8 billion people into poverty

The coronavirus pandemic will push the global economy into its deepest recession since the Great Depression, and could force half of the world’s 7.8 billion people into poverty.

Head of the International Monetary Fund, Kristalina Georgieva, announced her grim economic prediction out of Washington DC in the US on Thursday (local time).

“We anticipate the worst economic fallout since the Great Depression,” the IMF Managing Director said while previewing next week’s virtual meetings of the 189-nation IMF and its sister lending organisation, the World Bank.

She said that the IMF will release an updated world economic forecast on Tuesday that will show just how quickly the coronavirus outbreak has turned what had been expected to be a solid year of growth into a deep downturn.

The global economy will take years to repair from the coronavirus pandemic, the IMF says. Source: Getty Images

Just three months ago, the IMF was forecasting that 160 nations would enjoy positive income growth on a per capita basis. Now the expectation is that over 170 nations will have negative per capita income growth this year.

Emerging markets and low-income nations across Africa, Latin America and much of Asia are at high risk, she said.

“With weak health systems to begin with, many face the dreadful challenge of fighting the virus in densely populated cities and poverty-stricken slums, where social distancing is hardly an option,” Ms Georgieva said.

Investors have grown fearful of leaving their money in emerging economies that could be hit hard by a global recession, with capital outflows from emerging-market countries totalling more than $100 billion over the last two months, Ms Georgieva explained.

This is more than three times bigger than the same period at the start of the global financial crisis.

In addition, countries that depend on exporting commodities have taken a double blow because of the steep fall in commodity prices.

A crowd of men line up for free food during the Great Depression. Source: Getty Images

Ms Georgieva said there was no question that 2020 will be an “exceptionally difficult” year, saying if the pandemic fades in the second half of the year, the IMF is forecasting only a partial recovery in 2021.

“I stress there is tremendous uncertainty around the outlook. It could get worse depending on many variable factors, including the duration of the pandemic,” she said.

Debts to be halted and lending boosted

She said that she and World Bank President David Malpass will pursue at next week’s virtual meetings an agreement to adopt a standstill on debt payments over the next year by the world’s poorest nations, freeing up money they can use for critical health needs.

She also said that the IMF is prepared to commit its USD$1 trillion in lending capacity to providing support to nations that need help dealing with the pandemic.

“We are responding to an unprecedented number of calls for emergency financing from over 90 countries so far,” she said.

Meanwhile, charity organisation Oxfam has predicted the fallout from the coronavirus could see half of the world's population of 7.8 billion people living in poverty.

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