Categories: Business

IMF says coronavirus may shrink global imbalances further in 2020

Photo: PTI

IMF says coronavirus may shrink global imbalances

new Delhi. According to the International Monetary Fund, the reduction in current account imbalance across the world from 2019 onwards may continue in 2020 due to the corona virus. In the year 2019, it had seen a decline due to economic slowdown. In simple words, the difference in the surplus of one account in the economies of the world and the deficit in the economy of the other is now slowly shrinking. According to the IMF report, the flow of money has slowed due to the freeze of business, which is reducing the expenses of those dependent on imports, while the earnings of exporters are decreasing. Due to which the deficit is reduced due to the currency of import-dependent countries and on the other hand the earnings of exporters are ending the surplus situation, thereby limiting the global imbalance. However, according to the IMF, for economies such as commodities, tourism-dependent economies, there may be an increase in losses or they may go from surplus to deficit.

According to the IMF's External Sector Report, in 2019, the total current account deficit and surplus was below 3% of the world's GDP. According to estimates, in 2020 it is possible to decline further by 0.3 percent of GDP. According to the IMF, during 2019, 40 percent of the current account deficit and surplus worldwide exceeded their limits. Most of these have been concentrated in developed economies.

According to the IMF, uncertainties about the future have increased due to the epidemic. In such a situation, even though there is a possibility of reduction in imbalance, depending on the sector and economies, different effects can be seen. Economies that depend on money sent by oil, tourism or migrants working abroad may see a drop in their current account balance equal to 2% of their GDP. This will have a long-term impact on these economies. At the beginning of the epidemic, there was a sudden outflow of money in emerging and developing economies, which also put pressure on their currency. However, fiscal and monetary policy measures improved investor sentiments and limited pressure on the currency. However, there is a possibility of new pressure on the economies due to new Corona cases and business stress.

This post was published on August 5, 2020 1:21 am

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