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00:00IMF_3.dfxp Hello, I'm Stephanie Flanders. On today's episode I'll be speaking with the International Monetary Fund's chief economist Gita Gopinath. The IMF has just produced its latest forecast for the global economy and they're pretty bleak. It's expecting the global economy to shrink by three percent this year. That would be the steepest global reduction since the Great Depression, certainly worse than anything that happened in the global financial crisis. Gita Gopinath, looking at these forecasts, I noticed that you have your baseline scenario for the global economy and then everything else, all the alternatives are worse. What's driving the IMF's forecast that we're heading for this economic contraction and why do you think that all the alternative scenarios could be even worse? So our baseline assumes that the pandemic and the containment measures will peak in the second quarter for most countries in the world and then come off gradually in the second half. But clearly that's not a given and talking to epidemiologists and public health officials, there's certainly no certainty that'll happen. Now there are some countries where you are seeing containment measures working and there is a flattening of the curve and the number of new cases are coming down. But it's still too early to say, which is why we look into these other scenarios where the containment measures need to go into the second half of this year and even into 2021. And if that happens, then it will be doubling of the downturn which is from three percent, a negative three percent to negative six percent in 2020 and almost no recovery then in 2021. So it would be much worse. Does the IMF need new tools to deal with this crisis, help emerging market economies get the support they need or is it just about scaling up what you already have? At the IMF, we've had close to 100 countries come to us for financing needs. Just in the last how long? Well, in the last four weeks, a total of about 100. So it's a very large number coming in a very short time. I don't think we've had 100 countries come to us before. So this is unprecedented and then of course the speed at which is even more unprecedented. Globally, we've seen governments and central banks do all they can very quickly to limit the damage done by the shutdown of the economy to defeat the virus. Despite all that extraordinary effort, how worried are you about the permanent damage to the economy and to society that might come from this crisis? I think there is a substantial risk in that. This is a crisis that's affecting small and medium enterprises along with some of the big ones and getting to them is much harder. There is a lot to be concerned about here. Another thing I would want to flag is that while in the past when there's been a crises and you have all the stimulus in the system, it is a stimulus, which means you want people to go out and spend, you want folks to invest now, but that's not what the other side of this crisis is, which is a health crises. And at the same time all of this stimulus is in the system we want people to stay at home and not exactly go out and spend. So it's a very different transmission channel - - The hope is that you will keep people with sufficient income so that they can meet their needs, that firms and businesses can stay afloat, that once we get past this period of lockdown, that things would recover much faster. But the economic landscape will look very different once we come out of this lockdown. And I think there is tremendous uncertainty. Gita Gopinath, chief economist of the IMF, thank you very much. Thank you, Stephanie. on inequality and the economic cost of inequality in recent years and we've certainly seen the impact of the crisis, the big difference between employees and big companies who perhaps have quite strong employment rights and those in the gig economy who don't have that job security, bearing the brunt of this crisis. Do you think there'll be a new focus on those inequalities after this crisis? For countries to come out of this really grim situation, and this is true for all countries in the world, it's going to be important to get everybody to be able to survive this crises and to come out whole at the other end. And so having this kind of inequality which leads to permanent losses of income, people coming out losing out of the labor force where they can't maintain basic livelihoods doesn't help anybody. It doesn't help even from just a pure world perspective. So I think absolutely, I think it's very important for the world to ensure that there are again I would say automatic systems in place that get triggered whenever something like this happens to ensure that people get the support that they need and also to make sure that in normal times, that there is an equitable distribution of income in the world.

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IMF Warns Coronavirus Recession Could Be Worse Than Great Depression

The International Monetary Fund predicts the “Great Lockdown” recession will be the steepest in almost a century, if the coronavirus lingers or returns. Bloomberg's Stephanie Flanders talks with the IMF's chief economist, Gita Gopinath, about what the international community needs to do now and what lessons policymakers should take away from the Covid-19 pandemic. (Source: Bloomberg)

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