Countries that are putting in substantial fiscal measures to help their households, workers, and firms, are the ones where recovery can be faster.
Even as the central banks across the world have supported financial markets amid the coronavirus crisis, the first focus should now be on bringing households and businesses back on track. Countries that are putting in substantial fiscal measures to help their households, workers, and firms, are the ones where recovery can be faster, said Gita Gopinath, Chief Economist, IMF. Stating the coronavirus crisis unprecedented, Gita Gopinath added that policies have to be targeted towards helping firms and workers that are directly impacted by the lockdowns and there should be a provision of solidarity tax in poorer nations to raise funds.
Globalisation may come at rescue
While many nations are turning towards protectionism to be self-reliant and self-sustainable, the perks of globalisation cannot be ignored. Highlighting the benefits of globalisation, Gita Gopinath said that it has created a lot of jobs, reduced cross-country inequality by raising incomes in poor countries, and reduced poverty worldwide. She added that moving back into a very protectionist stance and drastically cutting interactions with other countries will just make it very difficult to recover from the present crisis. She further said that firms rely on global production to get the cheapest inputs and if that is not available to them, they can’t bring back workers onto their factories, which will worsen the situation.
Debt management in poor countries
In these times of financial crisis, there are many countries that are burdened with high levels of debt and cannot afford expensive borrowings from international markets. For these countries, Gita Gopinath suggested making provisions such as concessional financing, debt service relief, and debt restructuring. She also underlined that some sectors like travel-related industries and international tourism might see a permanent shift in demand, thus priorities have to be made as which ones are more systemically and strategically important. Consequently, for the other ones, nations should let them go into bankruptcy and later find a way to bring them back quickly the situation improves
Meanwhile, the primary attention is still on finding medical solutions to fight coronavirus, after which, making it available to the last man will be a humongous task. The IMF Chief Economist pointed out that the number one policy has to be with regard to health because this is a health crisis, which means that governments have to spend on ensuring enough health facilities.