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Pandemic-led recession 'way worse' than 2008 crisis, IMF says

International Monetary Fund Managing Director Kristalina Georgieva said she and leaders at the World Health Organization agree that the best way to fix the economy is to focus on stopping the spread of COVID-19. File Photo by Stephen Shaver/UPI
International Monetary Fund Managing Director Kristalina Georgieva said she and leaders at the World Health Organization agree that the best way to fix the economy is to focus on stopping the spread of COVID-19. File Photo by Stephen Shaver/UPI | License Photo

April 3 (UPI) -- The best way to limit the coronavirus pandemic's impact on the global economy is to focus on mitigating the spread of the disease, world health and financial leaders said Friday, warning that the current crisis is "way worse" than the 2008 financial crisis.

World Health Organization Director-General Tedros Ghebreyesus said countries should continue to focus on testing, isolating and treating every case of COVID-19, and trace every contact those patients have had. They should not relax pressure on battling the virus.

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"If countries rush to lift restrictions too quickly, the virus could resurge and the economic impact could be even more serious and prolonged," he said during a news conference in Geneva. "Financing the health responses, therefore, is an essential investment not just in saving lives but in the longer-term social and economic recovery."

Countries across the globe have instituted varying levels of stay-at-home or shelter-in-place orders for non-essential businesses in an effort to keep people home and halt the spread of the coronavirus. With some businesses shuttering or losing sales, millions are losing their jobs, throwing the world economy into chaos.

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In the United States, an additional 6.6 million people filed for unemployment benefits last week, the largest single-week increase in the country's history.

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Meanwhile, the virus has sickened more than 1 million people worldwide and killed at least 58,000, according to figures at Johns Hopkins University.

Ghebreyesus was joined at Friday's news conference by International Monetary Fund Managing Director Kristalina Georgieva. She described the current economic climate as "a crisis like no other."

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"We have witnessed he world economy coming to a standstill. We are now in a recession. It is way worse than the global financial crisis.

"This is, in my lifetime, humanity's darkest hour; a big threat to the whole world. And it requires from us to stand tall, be united and protect the most vulnerable of our fellow citizens on this planet."

Georgieva said the IMF has $1 trillion at its disposal to assist the most vulnerable countries. She said at least 90 countries have applied for assistance. She said countries should use the funds to focus on paying doctors and nurses, and purchasing medical supplies needed to fight the pandemic.

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"Our main preoccupation in this crisis is to rapidly step up financing for countries, especially emerging markets, developing countries that are faced with very significant and growing needs," she said.

The Asian Development Bank said Friday that the pandemic could cost the world between $2 trillion and $4.1 trillion, equaling between 2.3 percent and 4.8 percent of global GDP.

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The figure is a stark increase from the $347 billion at the top end, or equivalent to 0.4 percent of global GDP, the Manila-based regional development bank predicted on March 6.

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The bank also revised down its growth forecast for Asia to 2.2 percent from the 5.5 percent it had predicted in September. Assuming the pandemic ends, it expects growth to rebound to 6.2 percent next year.

However, ADB Chief Economist Yasuyuki Sawada admitted that these numbers could be off depending on how the world reacts to the pandemic, calling on world leaders to implement measures to lessen the virus' impact on the markets.

"The evolution of the global pandemic -- and thus the outlook for the global and regional economy -- is highly uncertain," Yasuyuki said in a statement. "Growth could turn out lower, and the recovery slower, than we are currently forecasting. For this reason, strong and coordinated efforts are needed to contain the COVID-19 pandemic and minimize its economic impact, especially on the most vulnerable."

For China specifically, the bank sees its recent contraction in industry, services, retail sales and investment to drag growth down to 2.3 percent this year though with expectations it will rebound to 7.3 percent in 2021.

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Excluding the industrialized economies of Hong Kong, South Korea, Singapore and Taipei, growth in developing Asia was revised down to 2.4 percent from 5.7 percent last year.

The report blames the slow growth not on Asia but on the "deteriorating external environment with growth stagnating or contracting in the major industrial economies of the United States, Euro area and Japan."

The report follows the World Bank forecast for East Asia, the Pacific and China on Monday that projected growth to slow this year to 2.1 percent in the base-line scenario or -0.5 percent at the lower-case scenario depending on how long the pandemic lasts. The region sustained a 5.8 percent growth in 2019.

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