The coronavirus pandemic is hitting the service harder than the manufacturing sector of the world economy, the International Monetary Fund (IMF), has said.
In a remarks by IMF Managing Director Kristalina Georgieva to Italy’s National Consultation, she said the pandemic it is truly global, because “firstly, we have not had a global crisis like this before. By the end of 2020, 170 countries will have lower per capita incomes than at the beginning of the year—when as recently as January we projected positive growth for 160 countries. This a stunning reversal of fortunes.”
Secondly, she added, the nature of the crisis means it is hitting the service sector especially hard, rather than a larger hit to manufacturing as often experienced.
“This time, what we see is a dramatic blow to tourism, hospitality, and travel. What it means is that we have had unemployment at the somewhat lower-skilled end of the spectrum, with the likelihood for elevated joblessness for these workers for quite some time.
Thirdly, “it is unique also in terms of the enormity of the response. And I want to praise you for that—praise Italy and all the countries that in a short time vastly increased fiscal measures: 10 trillion dollars up to now, with one third of this coming from the European Union. And there has been a massive injection of liquidity and easing of conditions by major central banks, again, with the European Central Bank forcefully doing its job.”
She further stated that if the economists among “us remember the definition of depression is a significant reduction in output, , lasting several years . Now, with these exceptional measures, we have put a floor under the world economy, and therefore, we are reducing dramatically the risks of scarring and the longevity of this crisis.
“Policy actions have also had some positive spillover effects for emerging markets. In March, emerging markets were basically shut out of access to bond issuance, creating tremendous concern about a potentially severe impact.
“In April and May, however, because of the scale of measures taken, primarily by advanced economies, but also by many emerging markets economies, the enormous injection of liquidity meant that emerging markets with good fundamentals could return and issue bonds. These critical financial lifelines can help countries stabilize at a time when economies are at a standstill.”