MNI POLICY: IMF Cuts Growth Forecast Amid Coronavirus Fears

By Ryan Hauser

     WASHINGTON (MNI) - The IMF on Wednesday warned it will cut its forthcoming

global growth forecast as the economic outlook moves toward a "more dire

scenario" as the coronavirus spreads.

     Growth this year would "fall below the level of last year," which was 2.9%,

IMF managing director Kristalina Georgieva said at a press conference in

Washington. Georgieva stressed the uncertainty surrounding the virus, both

economically and medically and said it "requires a high degree of coordination"

among governments. 

     "I cannot emphasize enough how urgent it is for authorities to lean forward

in funding outbreak-related health spending and the need to match demand with

supply of the necessary protective and treatment health products," she said.

World Bank Group president David Malpass, who appeared alongside her, also urged

coordination. 

     The current financial system is sound and more resilient than it was before

the 2008 financial crisis, but we are "wrestling with uncertainty," she said. 

     She attributed two-thirds of the virus-related disruption to the indirect

effects of uncertainty and only one-third to direct costs from the loss of life,

closures, and quarantines. The global economy faces a "generalized weakening of

demand" that includes tighter financial conditions that in turn call for

adequate supply of credit and liquidity, she added.

     The IMF is particularly concerned about the most vulnerable, low-income

member countries and pledged to make use of three tools to bolster countries in

emergency, including $1 trillion in lending capacity, "rapidly disbursing

emergency financing" of up to $50 billion, and $200 million in the Catastrophe

Containment and Relief Trust.

     "We have the tools to help" and "we are coordinating," she said.

     The World Bank also announced a $12 billion package yesterday to provide

critical short-term financing, Malpass said, noting a "clear need" to offer

financing assistance to small and medium size businesses.

--MNI Washington Bureau; +1 202 371 2121; email: ryan.hauser@marketnews.com

[TOPICS: M$A$$$,M$E$$$,M$Q$$$,M$U$$$,MI$$$$]