The International Monetary Fund (IMF) declared officially on Friday that the global economy has entered recession thanks to COVID-19.
The Head of the IMF, Kristalina Georgieva, said it is now clear that “we have entered a recession – as bad as or worse than in 2009.”
During the news briefing on Friday she also suggested that the length and depth of this recession depend on two things: containing the virus and having an effective, coordinated response to the crisis.
“I’m very encouraged by what I see now. I see much clearer understanding [among global leaders] that if we don’t beat it everywhere, we won’t be able to get out of it,” she added.
The IMF has taken extraordinary measures in efforts to contain the spread of the COVID-19, particularly the repercussions it will have on the global economy.
On March 16 the international body said it “stands ready” to use its $1 trillion lending capacity to help countries around the world that are struggling with the humanitarian and economic impact of the novel coronavirus.
The Solomon Islands government is looking at stimulus packages, which may only be a temporary fix for a deeper structural problem.
The Solomon Islands economic base is narrow, very narrow – making it extremely vulnerable to external shocks. The current COVID-19 health crises will only deepen in months to come, and for a country such as the Solomon Islands no level of stimulus can keep the economy afloat should this pandemic prolong – from months to years.
Already commodity prices have fallen as global market demand stalls, perhaps a prelude of things to come. We now live in a post COVID-19 era, where it cannot be business as usual.
In more advanced economies the government will spend, lower interest rates, increase tax on certain brackets - plus many other fiscal and monetary tools at their disposal.
For the Solomon Islands we certainly have the same tools, but perhaps not as sharp. Realistically an important first step is fiscal discipline – we need to reassess our priorities and commit to those that make economic sense.