IMF: "Countries Inject $8 Trillion in Fiscal Measures for COVID-19 Response... Sharp Rise in Fiscal Deficits Expected"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The International Monetary Fund (IMF) forecasted on the 15th (local time) that the amount of funds injected by governments worldwide in response to the novel coronavirus disease (COVID-19) crisis has reached $8 trillion (approximately 9728 trillion won), and that fiscal deficits and public debt levels are expected to surge this year. The IMF emphasized that these measures were taken to address the crisis caused by COVID-19 and that more fiscal stimulus will be needed after the pandemic situation.

In its semi-annual fiscal monitor report released that day, the IMF stated that governments around the world have spent nearly $8 trillion to combat the COVID-19 pandemic and mitigate its economic impact. This amount is equivalent to about half of the global gross domestic product (GDP), with over $2 trillion estimated to have been injected by the U.S. government. By detailed category, direct fiscal costs by governments accounted for the largest portion at $3.3 trillion, followed by $1.8 trillion in public sector loans and equity injections, and $2.7 trillion in other contingent liabilities. Additionally, $2.7 billion was spent on guarantees.

The IMF predicted that because governments mobilized massive fiscal resources to respond to COVID-19, the global budget balance and public debt ratios will deteriorate significantly. According to IMF estimates, the global fiscal deficit is expected to more than double from 3.7% of GDP last year to 9.9% this year. The global public debt level is forecasted to exceed 96% of GDP, rising by 13 percentage points compared to a year ago. In particular, for advanced economies that deployed large-scale stimulus packages, public debt is expected to increase from 105.2% of GDP last year to 122.4% this year, the IMF projected.

Gita Gopinath, IMF Chief Economist, commented on the report, saying, "Once recovery is underway and the pandemic phase passes, it will be essential for advanced economies to embark on broad-based fiscal stimulus," adding, "This will be more effective if coordinated across all advanced economies." Regarding concerns about excessive debt levels, she said, "If interest rates remain very low and the economy recovers as expected, over time this will help debt levels gradually decline," and advised central banks worldwide to keep interest rates low if inflation remains well below target.

Bloomberg News reported that Gopinath’s remarks downplaying the importance of fiscal deficits are similar to those of Olivier Blanchard, former IMF Chief Economist and current Senior Fellow at the Peterson Institute, who stated that government debt in major economies would not become a 'bogeyman' as long as low interest rates persist.

This content was produced with the assistance of AI translation services.