The International Monetary Fund (IMF) has stated that it supports the Indian government’s decision of enforcing a country-wide lockdown in its fight against the Covid-19 pandemic. Earlier, the IMF in its World Economic Outlook had projected India’s growth rate to be 1.9% in 2020.
“India entered the pandemic turmoil in the midst of a credit crunch-induced slowdown and its recovery prospect becomes more uncertain,” Chang Yong Rhee, the Director of the IMF’s Asia and Pacific Department, told reporters during a news conference here. “Despite the economic slowdown, the government implemented a nationwide lockdown and we support India’s proactive decision,” Rhee said.
The impression of the pandemic on the Asia-Pacific will be difficult and unprecedented, he said, adding that Asia’s growth in 2020 will come to a literal halt. This is worse than the annual average growth rates throughout the Global Financial Crisis (4.7%) or the Asian Financial Crisis (1.3% ).
Actually, Asia has not experienced zero growth in the last 60 years, he said. “That said, Asia’s growth still fares better than other regions.”
Emphasizing that this is not a time for business, as usual, Rhee said that Asian nations need to use all policy instruments in their kitty-bags and policy tradeoffs will be inevitable and will depend on policy space, he added.
Japan’s economic outlook for 2020 has deteriorated significantly, he said. Real GDP in Japan is expected to diminish by 5.2% severely impacted by Covid-19 besides an obvious decline of external demand, he said, adding South Korea’s growth in 2020 is anticipated to be at -1.2%, he said.
This is a massive economic jolt, unlike the Global Financial Crisis. Protect people, jobs, and industries directly, not just through financial institutions, he said. Recognizing that the outbreak is also impacting the financial markets, he advised governments to use monetary and macroprudential regulations flexibly to provide ample liquidity, ease the financial stress of industries and SMEs.
“For emerging markets with limited fiscal space, they might need to consider how to use central bank balance sheets flexibly to help SMEs through risk-sharing with the government,” he said. Emphasizing that external pressures need to be checked, he said that governments should seek and utilize bilateral and multilateral swap lines and financial support from the multilateral institutions.