Hello, I'm Stephanie Flanders.
On today's episode I'll be speaking
with the International Monetary Fund's
chief economist Gita Gopinath.
The IMF has just produced
its latest forecast
for the global economy
and they're pretty bleak.
It's expecting the global economy
to shrink by three percent this year.
That would be the
steepest global reduction
since the Great Depression,
certainly worse than
anything that happened
in the global financial crisis.
Gita Gopinath, looking at these forecasts,
I noticed that you have
your baseline scenario
for the global economy
and then everything else,
all the alternatives are worse.
What's driving the IMF's forecast
that we're heading for
this economic contraction
and why do you think that
all the alternative scenarios
could be even worse?
So our baseline assumes
that the pandemic and
the containment measures
will peak in the second quarter
for most countries in the world
and then come off gradually
in the second half.
But clearly that's not a given
and talking to epidemiologists
and public health officials,
there's certainly no
certainty that'll happen.
Now there are some
countries where you are seeing
containment measures working
and there is a flattening of the curve
and the number of new
cases are coming down.
But it's still too early to say,
which is why we look into
these other scenarios
where the containment measures
need to go into the
second half of this year
and even into 2021.
And if that happens,
then it will be doubling of the downturn
which is from three percent,
a negative three percent to
negative six percent in 2020
and almost no recovery then in 2021.
So it would be much worse.
Does the IMF need new tools
to deal with this crisis,
help emerging market economies
get the support they need
or is it just about scaling
up what you already have?
At the IMF, we've had
close to 100 countries
come to us for financing needs.
Just in the last how long?
Well, in the last four weeks,
a total of about 100.
So it's a very large number
coming in a very short time.
I don't think we've had 100
countries come to us before.
So this is unprecedented
and then of course the speed at which
is even more unprecedented.
Globally, we've seen
governments and central banks
do all they can very quickly
to limit the damage done
by the shutdown of the economy
to defeat the virus.
Despite all that extraordinary effort,
how worried are you about
the permanent damage
to the economy and to society
that might come from this crisis?
I think there is a
substantial risk in that.
This is a crisis that's affecting
small and medium enterprises
along with some of the big ones
and getting to them is much harder.
There is a lot to be concerned about here.
Another thing I would want to flag
is that while in the past
when there's been a crises
and you have all the
stimulus in the system,
it is a stimulus,
which means you want
people to go out and spend,
you want folks to invest now,
but that's not what the
other side of this crisis is,
which is a health crises.
And at the same time
all of this stimulus is in the system
we want people to stay at home
and not exactly go out and spend.
So it's a very different
transmission channel
- -
The hope is that you will keep people
with sufficient income
so that they can meet their needs,
that firms and businesses can stay afloat,
that once we get past
this period of lockdown,
that things would recover much faster.
But the economic landscape
will look very different
once we come out of this lockdown.
And I think there is
tremendous uncertainty.
Gita Gopinath, chief economist of the IMF,
thank you very much.
Thank you, Stephanie.
on inequality and the
economic cost of inequality
in recent years
and we've certainly seen
the impact of the crisis,
the big difference between
employees and big companies
who perhaps have quite
strong employment rights
and those in the gig economy
who don't have that job security,
bearing the brunt of this crisis.
Do you think there'll be a new
focus on those inequalities
after this crisis?
For countries to come out of
this really grim situation,
and this is true for all
countries in the world,
it's going to be
important to get everybody
to be able to survive this
crises and to come out whole
at the other end.
And so having this kind of inequality
which leads to permanent losses of income,
people coming out losing
out of the labor force
where they can't maintain
basic livelihoods
doesn't help anybody.
It doesn't help even from
just a pure world perspective.
So I think absolutely,
I think it's very important for the world
to ensure that there are again I would say
automatic systems in place
that get triggered whenever
something like this happens
to ensure that people get
the support that they need
and also to make sure
that in normal times,
that there is an equitable distribution
of income in the world.
