COVID-19

IMF encourages countries affected by COVID to keep spending on safety net

Nancy Marshall-Genzer Oct 13, 2020
Heard on: Marketplace
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A woman walks past a promotional poster for the virtual 2020 International Monetary Fund annual meetings, outside their headquarters in Washington, D.C., on Oct. 13, 2020. Andrew Caballero-Reynolds/AFP via Getty Images
COVID-19

IMF encourages countries affected by COVID to keep spending on safety net

Nancy Marshall-Genzer Oct 13, 2020
A woman walks past a promotional poster for the virtual 2020 International Monetary Fund annual meetings, outside their headquarters in Washington, D.C., on Oct. 13, 2020. Andrew Caballero-Reynolds/AFP via Getty Images
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The International Monetary Fund issued a report Tuesday on the current global economic outlook.

The IMF is projecting global growth will contract by more than 4% this year. That’s slightly better than its June forecast, but still pretty grim.

For now, the IMF said all countries, not just the U.S., should stop worrying about their debt and spend what is needed to keep their citizens above the poverty line. 

The IMF says close to 90 million people could fall into extreme poverty — living on less than a $1.90 per day — as COVID-19 widens the global wealth gap. Eric LeCompte heads Jubilee USA Network, a coalition of aid organizations. He said people on the lowest rungs of the economic ladder — migrant workers and low-skilled factory workers — are most at risk.

“We are looking at perhaps half the world’s population living in extreme poverty,” LeCompte said.

The solution, according to the IMF, is that countries should borrow and spend big to strengthen the social safety net. That means health care coverage, unemployment benefits and job retraining.

Ben May, director of global macro research at Oxford Economics, said that government spending can be a lifeline. “I think there is an understanding that at the moment, fiscal policy is particularly powerful, and it does play a role in lifting these economies out of recession,” he said.

Plus, borrowing is cheap right now: Interest rates are super low. But developing countries that borrow should remember they’ll have to pay it back.  

“It will be incredibly difficult for industrialized countries to be able to waive off those debts and just to say ‘You don’t need to pay us back,'” said Shihoko Goto, deputy director for geoeconomics at the Wilson Center.

But countries that borrow from the IMF are getting a bit of a reprieve. The IMF has decided to give them more time to repay their debts. 

COVID-19 Economy FAQs

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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