International Monetary Fund chief downbeat on global economic recovery

IMF's managing director Kristalina Georgieva. (Shutterstock photo)
Short Url
Updated 10 May 2020

International Monetary Fund chief downbeat on global economic recovery

  • The IMF’s April projection for a 3 percent contraction in the global economy would mark the steepest downturn since the Great Depression of the 1930s

WASHINGTON:  The head of the International Monetary Fund (IMF) signaled a possible downward revision of global economic forecasts on Friday, and warned the US and China against rekindling a trade war that could weaken a recovery from the coronavirus pandemic.

Kristalina Georgieva, the IMF’s managing director, told an online event hosted by the European University Institute that recent economic data for many countries was coming in below the fund’s already pessimistic forecast for a 3 percent contraction in 2020.

“With no immediate medical solutions, more adverse scenarios might unfortunately materialize for some economies,” Georgieva said. “It is the unknown about the behavior of this virus that is clouding the horizon for projections.”

The IMF’s April projection for a 3 percent contraction in the global economy would mark the steepest downturn since the Great Depression of the 1930s. The IMF forecast a partial rebound would follow in 2021, but warned that outcomes could be far worse, depending on the course of the pandemic.

The US economy — the largest in the world — has been particularly hard hit by widespread shutdowns aimed at containing the virus. US government data on Friday showed the unemployment rate surging to 14.7 percent last month. The White House said joblessness could hit 20 percent in May.

US President Donald Trump has threatened to punish China for its handling of the virus by imposing new tariffs, and on Friday suggested he could end a Phase 1 US-China trade deal.

Top US and Chinese trade officials said they would press ahead with implementing the initial trade deal, but some observers say China’s promised purchases of US goods are running far behind the pace needed to meet the first-year goal of a $77 billion increase over 2017 levels.

Georgieva warned that a retreat into protectionism could weaken the prospects for a global recovery.

Asked how concerned she was that rising US-China tensions could jeopardize the global economy, Georgieva said: “It is hugely important for us to resist what may be a natural tendency to retreat behind our borders.”

Reigniting world trade was critical for a global economic recovery. “Otherwise,” she added, “costs go up, incomes down, and we will be in a less secure world.”

Georgieva said the IMF had already provided emergency funding to 50 of the 103 countries that had requested aid. Poor countries remained at high risk given a sharp drop in remittances and falling commodity prices, even if mortality rates from the virus were lower than in some richer countries.

The IMF’s chief economist, Gita Gopinath, told an event hosted by the Council on Foreign Relations on Thursday that the situation had worsened since March when the IMF projected that emerging markets and developing countries would need $2.5 trillion in external financing to manage the health and economic crisis.

“This crisis is likely to last longer,” she said. “And so the needs will go up, even above that number.” 


Berlin’s ill-fated new airport finally ready for take-off

Updated 28 October 2020

Berlin’s ill-fated new airport finally ready for take-off

  • The airport, located in the south-east of the capital, was originally due to open in 2011
  • BER initially projected to cost $2 billion but already was past the $7.6 billion mark

BERLIN: Nine years late and eye-wateringly over budget, the Berlin region’s new international airport will finally open on Saturday — in the middle of a global pandemic that has crippled air travel.
“We are ready for take-off!” insists the management team at the new Berlin Brandenburg Airport (BER), set to replace the German capital’s aging Tegel and Schoenefeld airports.
But the mood is one of relief rather than celebration.
Ever since construction began on BER in 2006, the project has been dogged by one failure after another, becoming a financial black hole and a national laughing stock — not exactly an example of German efficiency.
The airport, located in the south-east of the capital, was originally due to open in 2011.
Now it is opening its doors in the middle of the worst crisis the aviation industry has ever seen, as COVID-19 restrictions continue to suffocate air travel.
And as if that were not enough, there’s also the climate crisis: pressure group Extinction Rebellion is planning acts of “civil disobedience” on the opening day to protest against the impact of aviation on global warming.
Against that backdrop, “We will simply open, we will not have a party,” according to Engelbert Luetke Daldrup, president of the airport’s management company.
Lufthansa and EasyJet will be the first two airlines to touch down on the tarmac of what will be Germany’s third-largest airport, after Frankfurt and Munich.
A few days before the opening, around 200 staff were busy disinfecting the 360,000-square-meter Terminal 1.
Some 100 alcoholic hand gel dispensers have been installed and robot vacuum cleaners hum over the floors.
The “Magic Carpet,” a huge, bright red artwork by American artist Pae White suspended from the ceiling, brings a touch of color to the check-in hall.
The airport has been designed to welcome 27 million passengers a year, but in November it will see only 20 percent of usual air traffic thanks to the pandemic.
Terminal 2 won’t open until spring 2021.
About 15 shops and restaurants out of just over 100 will remain shut, while the rest will be forced to keep “limited opening hours” because of low traffic through the airport, a spokesman said
None of this good news for BER, initially projected to cost $2 billion but already past the $7.6 billion.
The airport has been granted $353 billion in state aid to help safeguard the jobs of the 20,000 people who will eventually work there until the end of 2020.
The health crisis is already having an impact on employment at the hub: at the end of July, Berlin’s airports announced the loss of 400 jobs out of a total of 2,100.
EasyJet has said it will cut 418 jobs in the German capital, and Europe’s leading airline Lufthansa, Germany’s flagship carrier, is to shed 30,000 jobs worldwide.
“We fear even greater job losses in the future,” a spokesman for the Verdi union said.
Luetke Daldrup hopes the situation will improve “from the spring onwards.” But the International Air Transport Association does not expect global air traffic to reach pre-crisis levels until 2024.
In the state of Brandenburg, which surrounds Berlin, local leaders remain optimistic about the prospects for development.
“No hotel has so far postponed its investment plans because of the pandemic,” insists Olaf Luecke, president of the local branch of Germany’s hotel and catering trade union (DEHOGA).
Construction work began in September on two 14,000-square-meter (150,000-square-foot) hotel complexes, due to open in 2022.
And in anticipation of the opening of BER, US electric-car giant Tesla has chosen Brandenburg as the location of its first European factory, which is set to employ 40,000 people.
“Having new, modern infrastructure will be beneficial in any case, despite the pandemic,” according to Carsten Broenstrup of the state employers’ association.
But “if there is not a vaccine soon, it will be a very big problem,” he admits.