WASHINGTON, United States — Globalization has been under fire around the world, but the coronavirus pandemic has added fuel to those concerns, IMF chief economist Gita Gopinath said on Wednesday. Speaking in an interview with AFP, she urged countries to work to improve the system, and to continue to support the recovery from the economic crisis COVID-19 has created:
How concerned are you about the signs of a backlash against globalization?
"Even before this crisis hit, we saw a serious questioning of globalization and its benefits. And we also saw rising trade tensions. Now this crisis has probably exacerbated some of that. But it's very important for countries to work together, and we have been calling explicitly for not putting export restrictions on, for instance, medical supplies and medical goods, because this is the time when the world as a whole needs it. They have to be collaborative and have to work together. The system is not perfect, the multilateral trading system needs improvement and countries should work together to improve that... Going backwards, and moving your production inwards is not a good strategy for growth and not a good strategy for alleviating poverty around the world."
What is the best strategy for governments to avoid long-term damage to their economies?
"This crisis has been different in terms of policy response compared to the Great Recession. The support has been fast, it's been substantial, it's been targeted and that has absolutely helped, and I believe policymakers have the appetite to do whatever it takes. If we didn't do that at this point, we will be setting ourselves up for a much worse recovery. But going forward, it'll have to be that you have to build a job-rich recovery for the global economy. Some of it will require providing hiring subsidies to firms to be able to hire those people who otherwise would be long-term unemployed.
Our view is that policymakers will need to adapt as the situation evolves. You cannot withdraw support too quickly. More will likely be needed, because this crisis is not over and it's going forward."
How do you see prospects for the United States given reports of a resurgence of cases in some states?
"The biggest hit is going to be in the second quarter, and after that we expect to see recoveries. We've already seen some recovery is taking place in some sectors, though it's highly uneven, and we expect the recovery to be gradual. So, even by the end of 2021, our projection is for the level of GDP to be below what it was in 2019. In our baseline, we have allowed for the fact that there will be a possible increase in the number of cases, but not a second big wave. If that were to happen, and that would be true for any country in the world, that would be a major risk.
The US has done substantial and unprecedented support and this has come both from fiscal policy and monetary policy, so they've done a lot. And that has been very helpful. This has succeeded in helping people with their livelihoods and also preventing wide-scale bankruptcies. So both of those should absolutely help with the recovery going forward."
Source: philstar.com