A top financial editor on Thursday said the International Monetary Fund’s estimate about the global growth is optimistic and that it could be twice as bad for developed economies.
Speaking to India Today TV News Director Rahul Kanwal, the Chief Editor of Financial Times and top business comments Martin Wolf said such predictions may not materialise unless the Covid-19 pandemic is dealt with effectively.
Wolf’s comments came during a session of the India Today E-Conclave Corona series.
When asked whether IMF’s estimate on the world’s economic growth projection for FY21, he said it is optimistic and that the world will see a “weak recovery” if all goes well and the virus does not reemerge.
“Globally, until we have got the pandemic under control, the world economy will not go back to normal,” Wolf said during the session.
“I think the best estimate is that we are going to have a weak recovery. If we open up lockdowns too soon we will have a W recovery,” he said. A ‘W’ curve recovery could be a possibility if the virus reemerges after companies around the globe resume operations.
That could lead to further economic pressure as the world would go through another period of economic depression before final recovery.
“This year will be terrible, could be twice as bad as the IMF has predicted. After that, there could be very strong recovery if the situation improves,” he said.
Explaining why he felt IMF’s estimate on global growth was optimistic, he said there will be wide-scale uncertainty once the world opens up after the pandemic is contained. He said governments may put tighter restrictions on travel and other activities, which will lead to a weaker recovery.
He added that protectionism could also witness a rise in the post-pandemic landscape.
In India’s case, Wolf said there are many challenges for a country like India, where a large part of the population has lost jobs in the wake of Covid-19 lockdown.
Wolf said the decision to lock down key economic activities during the pandemic is fair, given the situation but added that the Indian economy will take a massive hit as public debt will rise exponentially and that the country’s fiscal deficit levels could be stretched to the limit.
But the top business commentator feels that the Indian government has to solely focus on saving the livelihoods of the people and companies in order to effectively restart the economy when the situation improves.
In other points, Wolf said that the world is suffering from the worst economic crisis since the Great Depression and the intensity of the distress this time is way greater.
Martin Wolf said, “It is fundamentally different in its origin, nature and intensity. Its speed surpasses the Great Depression.”
“We are still in the beginning of the collapsed phase of many economies. The overall economic loss will be much greater than any economic crisis that we have seen in the past.”