Measures against the novel coronavirus pandemic, such as health $expenditure, tax, and spending supports for people and firms, will have $3.3 trillion of fiscal cost directly, the International Monetary Fund (IMF) said on Wednesday.
The COVID-19 and its economic results will cause a major increase in fiscal deficits and public debt ratios versus previous expectations, the IMF said in its report titled Fiscal Monitor 2020.
“In addition, although public sector loans and equity injections ($1.8 trillion) and guarantees and other contingent liabilities ($2.7 trillion) can support financial and non-financial enterprises, they also create fiscal risks,” it added.
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The fund underlined that the global outbreak elevated the requirement for fiscal policy action to an “unprecedented level”.
It warned the virus’s human cost has deepened and it is expected to affect public finance massively.
“Government responses should be swift, concerted, and commensurate with the severity of the health crisis, with fiscal tools taking a prime role,” it said.
“The first priority, saving lives, requires fully accommodating spending on testing and treatment, which calls for global coordination — including support to countries with limited health capacity, through grants and concessional financing and the development of a universally low-cost vaccine.”
It also stressed that companies should be supported with liquidity to protect them against bankruptcy.
The IMF also noted that revenues will drop even more sharply as output falls. “Revenue is projected to be 2.5% of global GDP lower in the baseline scenario for 2020 than what was projected in the October 2019 Fiscal Monitor.”
The fund apprised that fiscal balances will deteriorate in almost all countries in 2020 while the sizable expansions are expected in economies of the U.S., China, and several European and Asian economies.
A number of major economies took measures to inject liquidity markets against the pandemic’s destructive impact on the economy so far.
The pandemic’s impact will be deeper on emerging markets and developing economies, which should “reprioritize expenditure toward the health sector while safeguarding key public services (transport, energy, communications) and social protection,” the IMF said.
The virus has spread to 185 countries, infecting more than 1.99 million people since first emerging in Wuhan, China late last year, according to the U.S. based Johns Hopkins University.
The global death toll is over 127,600, while more than 500,000 people have recovered.
Anadolu with additional input from GVS News Desk.