World economy could suffer ‘significant scarring’, says IMF official

WASHINGTON: The economic fallout from the coronavirus pandemic could inflict “significant scarring” worldwide and the outlook for recovery remains highly uncertain, IMF chief economist Gita Gopinath said Friday.

The fund in April projected a global economic contraction of 3%, but Gopinath said the updated forecasts due out June 24 “will be very likely worse”.

“There is profound uncertainty of recovery,” she said in a virtual address to the 7th Asian Monetary Policy Forum.

Noting the damage done in particular sectors like transportation, as well as the growing risk of bankruptcies and persistent job losses, coupled with expected changes in consumer behaviour “one has to be concerned about the path of recovery.”

“Many of these variables point to significant scarring effects,” she said, which would leave lasting damage on the global economy.

In its World Economic Outlook in April, the Washington-based crisis lender warned that the downturn could be worse if the pandemic was prolonged or saw a resurgence.

The World Bank last week said it expects the global economy to contract by 5.2%, in the most widespread crisis in 150 years.