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IMF’s Georgieva says lack of reforms is hurting global economy

Even before the scale of the coronavirus outbreak in China became clear, the IMF predicted the world economy will strengthen in 2020 at a slightly weaker pace than previously anticipated amid threats related to trade and tensions in the Middle East.

By: Bloomberg | Updated: February 17, 2020 2:18:30 pm
“I am quite optimistic that in very difficult moments we would see the appetite for more coordinated action,” Georgieva said. (Krisztian Bocsi/Bloomberg)

The head of the International Monetary Fund said the lack of deeper improvements in the global economic system is hindering what’s already an “anemic” outlook for growth, especially as the shock caused by the coronavirus further dims prospects for a pickup this year.

“The monetary policy space is shrinking and the reliance on fiscal measures as well as on structural reforms to boost growth ought to be stronger,” IMF Managing Director Kristalina Georgieva said Sunday in a Bloomberg Television interview in Dubai. What’s missing is “a more aggressive swing in structural reforms.”

As the virus’s impact raises the threat of disruption across supply chains, most major central banks are on alert but have yet to indicate that they plan monetary easing. Even before the scale of the outbreak in China became clear, the IMF predicted the world economy will strengthen in 2020 at a slightly weaker pace than previously anticipated amid threats related to trade and tensions in the Middle East.

The fallout is expected to dominate discussions at this week’s meeting of finance ministers and central bankers at a Group of 20 summit in the Saudi capital, Riyadh. Georgieva reiterated that she’s hopeful for a synchronized global response to the risks facing the world economy.

“I am quite optimistic that in very difficult moments we would see the appetite for more coordinated action,” Georgieva said.

While saying it was premature to assess the economic shock of the coronavirus, Georgieva praised China for its “very aggressive” measures to contain the impact, including with an infusion of liquidity and stimulus to the affected regions. “We need to recognize there is a great deal of uncertainty around the nature of the virus, how exactly it is impacting China, would it spread beyond China,” she said.

HSBC Holdings Plc became the latest major bank to cut its outlook for global growth, reducing it to 2.3% from 2.5%. World Bank President David Malpass has warned that the lender will need to lower some of its growth forecasts, in part due to the virus’s impact on supply chains. Economists from Goldman Sachs Group Inc. to UBS Group AG and BNP Paribas SA see more easing steps ahead in China.

“Even a month of reduction in activities inevitably would have an impact on China and some of it would be translated to the rest of the world,” Georgieva said. “We are still hoping that the most likely scenario would be relatively rapid containment of the virus.”

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