The International Monetary Fund has announced $50bn (£39bn) of emergency funding for countries hit by the coronavirus epidemic.
The IMF warned last night that the Covid-19 outbreak, which has reached 70 of the organisation’s 189 member countries, has already pushed global growth for 2020 below last year’s level.
“Global growth in 2020 will dip below last year’s levels, but how far it will fall and how long the impact will be is still difficult to predict,” said IMF managing director Kristalina Georgieva.
Georgieva said the epidemic would hold 2020 output gains to their slowest pace since the 2008 financial crisis, but declined to say whether the outbreak could push the world into a recession.
The emergency funding is aimed at helping poor and middle-income countries with weak health systems respond to the epidemic, Georgieva said.
Around $10bn of the total can be accessed by the poorest countries at zero interest for up to 10 years, while many middle-income countries will be able to access the remaining $40bn at low interest rates for up to five years.
The IMF funding is the latest emergency measure aiming to mitigate the economic impact of the coronavirus outbreak to be announced by global financial bodies, and Georgieva and World Bank President David Malpass underscored the importance of coordinated action to limit its economic and human impact.
The World Bank has committed $12bn of aid for developing countries grappling with the outbreak, and finance ministers from the G7 have pledged to use “all available tools” to combat the impact of Covid-19.
On Tuesday, the US Federal Reserve announced its first emergency interest rate cut since the global financial crisis, slashing rates by 50 basis points to between one and 1.25 per cent.
Yesterday, both Australia and Malaysia cut interest rates in response to the outbreak, and expectations of rate cuts by the European Central Bank and Bank of England are rising.
“While the IMF is usually viewed as a lender of last resort but being one of the first out of the gate with policy action will go a long way to set precedent, and we should expect more G7 policymakers to follow in lockstep,” said Axitrader’s Stephen Innes.
“Indeed, investors are bullishly anticipating additional coordinated policy action from central banks and more significant budget spending from G-7 governments to support the global economy.”