The coronavirus pandemic crisis “feels like a war, and in many ways it is,” the International Monetary Fund (IMF) said in a blog post released on Wednesday.
The coronavirus, officially known as COVID-19, has increased its spread rapidly across the world. There are nearly 900,000 infections worldwide, with over 42,000 dead. Borders have been closed, businesses shuttered, and people told not to leave home.
Now, the IMF has released its assessment of the worst effects of the crisis – and an outline of its plan to survive the pandemic.
“People are dying. Medical professionals are on the front lines. Those in essential services, food distribution, delivery, and public utilities work overtime to support the effort. And then there are the hidden soldiers: those who fight the epidemic confined in their homes, unable to fully contribute to production,” the post said.
Numerous other analysts and world leaders have recently referred to the pandemic as a war. US President Trump on Tuesday said, “Every one of us has a role to play in winning this war.”
Earlier in March, Trump implemented the Defense Production Act to push the private sector into production of equipment to counter the pandemic. The act was passed in 1950 at the beginning of the Korean War to push the private sector into helping authorities achieve wartime aims, and used again throughout the Cold War.
“In a war, massive spending on armaments stimulates economic activity and special provisions ensure essential services. In this crisis, things are more complicated, but a common feature is an increased role for the public sector,” the IMF’s note read.
The blog went on detail how policy makers need to react to the coronavirus, highlighting that there are two key phases to the pandemic.
Phase 1 consists of “the war,” where mitigation measures in place, such as broad lockdowns confining people to their homes, are “severely curtailing economic activity.” The Fund estimates this to continue for three to six months.
Phase 2 is “the post-war recovery.” Once the coronavirus is under control, whether it be by vaccine, partial herd immunity, or a less-significant form of containment, the economy can begin to return to normal functioning.
“The success of the pace of recovery will depend crucially on policies undertaken during the crisis,” the note read.
Policy-makers will need to ensure that all players in the economy survive the economic crisis caused by the coronavirus. This includes workers keeping their jobs, homeowners and renters staying in their homes, businesses not falling to bankruptcy, and maintaining trade and business networks, the Fund added.
While advanced economies are better suited to the crisis, such as the US Fed’s unprecedented decision to announce that its funding to buy debt and support the economy is virtually without limit, low-income and emerging economies are significantly at threat.
“They will require grants and financing from the global community,” the post read.
These statements echo calls made at various G20 meetings over the past week where leaders highlighted the plight of poorer nations.
UN Secretary-General Antonio Guterres urged G20 leaders to adopt a “wartime” plan including a stimulus package “in the trillions of dollars” for businesses, workers and households in developing countries trying to tackle the coronavirus pandemic.
However, several factors need to be managed in enacting these policies. Large economic stimulus packages for industries and corporations have already been announced in some areas, such as aviation.
“If transfer of subsidized loans are given to a large corporation, they should be conditional on preserving jobs and limiting CEO compensation, dividends, and stock repurchases,” the IMF said.
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