Financial Observation: The severe global economic situation highlights the importance of multilateral cooperation

　　Financial Observation: The severe global economic situation highlights the importance of multilateral cooperation

　　Xinhua News Agency, Washington, April 14 - Finance observation: the global economic situation highlights the importance of multilateral cooperation

　　Xinhua News Agency reporter Xu Yuan Gao Pan

　　The International Monetary Fund (IMF) released the "World Economic Outlook Report" on the 14th. It is expected that the impact of the new crown epidemic will cause the global economy to shrink by 3% this year, becoming the worst economic recession since the Great Depression in the 1930s. Whether the global economy will rebound sharply next year will depend on whether countries can strengthen multilateral cooperation, curb the spread of the epidemic and promote economic recovery after the epidemic.

The worst recession since the Great Depression

　　The IMF said in the report that, based on the assumption that most countries in the world will peak in the second quarter of this year and subside in the second half of the year, the global economy will shrink by 3% in 2020, a significant reduction of 6.3 from the growth rate forecast of 3.3% in January percentage point.

　　The report predicts that this year the economy of advanced economies will shrink by 6.1%, and that of emerging markets and developing economies will shrink by 1%. The report predicts that the US economy will contract by 5.9% this year, the euro zone economy will contract by 7.5%, and the Japanese economy will contract by 5.2%.

　　The IMF believes that if the new crown epidemic subsides in the second half of the year, the policy measures adopted by various countries will effectively prevent the emergence of a large number of corporate bankruptcies, long-term unemployment and systemic financial pressure. The global economy is expected to rebound to 5.8% in 2021. But by the end of 2021, global gross domestic product (GDP) will still be lower than the trend level predicted before the outbreak. The IMF predicts that the cumulative damage to global GDP from the epidemic this year and next two years will reach approximately US $ 9 trillion, exceeding the combined economic aggregates of Japan and Germany.

　　The impact of the epidemic on the global economy also far exceeded the 2008 international financial crisis. IMF data shows that after the financial crisis broke out, the global economy shrank by 0.1% in 2009, but mainly because advanced economies fell into recession, and emerging markets and developing economies still maintained growth.

The impact is huge and the uncertainty is strong

　　IMF chief economist Gita Gopinat believes that the global economic recession caused by the new crown epidemic is very different from the past. First, the impact is huge, and the output loss caused by the epidemic and related prevention and control measures may far exceed the financial crisis; second, there is a significant uncertainty in the duration and intensity of the epidemic impact; third, usually in the crisis, policymakers can stimulate aggregate demand Promoting the recovery of economic activities, but this time largely depends on the results of epidemic prevention and control.

　　The IMF pointed out in the report that in order to curb the spread of the epidemic, most economies have adopted measures such as "isolation, regional blockade, and social alienation." These measures have restricted economic mobility, leading to disruptions in the supply chain and changes in consumption patterns. The "stoppage" of economic activities, the decline in income, and concerns about virus infection have caused the public to reduce consumption, which has also caused more companies to close their doors and lay off employees. The economic impact of the epidemic has spread to trading partners and the world through trade and global value chains.

　　The IMF pointed out that since mid-February, the global financial market sentiment has deteriorated due to the epidemic. The oil price plunge in early March has further reduced market sentiment, and investors have urgently dumped risky assets, causing large fluctuations in the financial market. The central banks of major economies such as the Federal Reserve and the European Central Bank adopted measures such as lowering interest rates and expanding quantitative easing policies, and launched currency swap agreements to inject liquidity into the market. Nonetheless, the financial environment caused by the epidemic has significantly tightened and further suppressed economic activity in the short term.

　　At present, there is still uncertainty as to when the global epidemic will be contained. If the epidemic lasts longer this year, the IMF expects that this year ’s global GDP will be about 3% lower than the baseline scenario forecast; if the epidemic continues into 2021, next year ’s global GDP will be about 8% lower than the baseline scenario forecast.

Multilateral cooperation is essential

　　Gopinat pointed out that when the global economy faced a large-scale crisis in the 1930s, the lack of "last lenders" of multilateral institutions led some countries to adopt futile mercantilist policies and scramble for international liquidity, which further worsened the global economic recession. . A key difference in the current crisis is that the world has established a strong financial safety net with the IMF at its core and is actively helping vulnerable countries. In this process, the importance of multilateral cooperation has become prominent.

　　First, strong multilateral cooperation is essential to curb the spread of the epidemic. The IMF believes that providing assistance to countries with weak health care systems and financial constraints will effectively curb the spread of the epidemic worldwide.

　　Secondly, multilateral cooperation is crucial to the recovery of the global economy. The IMF pointed out that in order to avoid damage to the globalization process and economic recovery, the world needs to strengthen cooperation to help the economy recover. The international community provides financial assistance to some emerging markets and developing economies. Bilateral creditors and international financial institutions should provide preferential financing and debt relief.

　　Furthermore, multilateral cooperation is essential to prevent new risks globally. The IMF believes that in the future, in order to prevent the recurrence of similar epidemics and economic crises, it is necessary for all economies to build a global reserve system of personal protective equipment, and establish a basic supply agreement without trade barriers to strengthen public health Safety.