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The IMF’s Chief Economist on Lessons From the "Great Lockdown" · Stephanomics

• 0:03
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:05
  Speaker 1: global economy to you. If all the international conferences in
• 0:14
  Speaker 1: the world get canceled, will global output go up or down?
• 0:19
  Speaker 1: I remember putting that question jokingly to a few economists
• 0:21
  Speaker 1: in the early stage of the COVID nineteen crisis, back
• 0:24
  Speaker 1: when we were just canceling meetings and events, not putting
• 0:27
  Speaker 1: all of normal life on hold. The answer we thought
• 0:30
  Speaker 1: was it would reduce global output, but deprived of all
• 0:33
  Speaker 1: that networking and speechifying, the productivity of the participants would
• 0:37
  Speaker 1: surely go up. I thought of that this week because
• 0:41
  Speaker 1: one fixed point in the international calendar that hasn't moved
• 0:44
  Speaker 1: to the date of the spring meetings of the International
• 0:46
  Speaker 1: Monetary Fund and the World Bank. They've all been happening
• 0:49
  Speaker 1: this week online, and they might turn out to be
• 0:52
  Speaker 1: more important than usual as finance ministers and central bank
• 0:55
  Speaker 1: governors think about how best to help the world economy
• 0:58
  Speaker 1: come out. The other side was spending most of this
• 1:01
  Speaker 1: week's episode talking about that with the I m S
• 1:04
  Speaker 1: Chief economist Peter gop Enough, but first, I wanted quickly
• 1:07
  Speaker 1: to bring your attention to one other feature of the
• 1:09
  Speaker 1: economic landscape that hasn't budged, and that's German policymaker's conviction
• 1:15
  Speaker 1: that they are always right. Well. Europe Economy reporter Katherine
• 1:24
  Speaker 1: Boseley will tell us more. Sitting in Zurich, Catherine, many
• 1:28
  Speaker 1: of us, looking at the way that Germany has responded
• 1:31
  Speaker 1: to this crisis might have thought that they had seen
• 1:34
  Speaker 1: the light on running budget deficits to support the economy.
• 1:38
  Speaker 1: But they don't see it that way, do they. No.
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  Speaker 1: I think quite the contrary. I think many people in
• 1:43
  Speaker 1: the country will see it as a confirmation of their
• 1:47
  Speaker 1: their approach of their frugality, where you essentially, to use
• 1:50
  Speaker 1: the words of the I M F, repair the roof
• 1:53
  Speaker 1: when the sun is shining and then you have reserves
• 1:56
  Speaker 1: for a rainy day. In the piece that you wrote
• 1:59
  Speaker 1: earlier this week, you talked about this is the black
• 2:01
  Speaker 1: zero policy. It's that that every any anyone who wants
• 2:04
  Speaker 1: to be a finance minister in Germany basically has to
• 2:06
  Speaker 1: sign up to the idea that you really never run
• 2:08
  Speaker 1: a deficit unless you absolutely have to. Um but it's uh.
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  Speaker 1: Many would say that they've gone beyond just mending the roof.
• 2:18
  Speaker 1: They've sort of refused to invest in things that they
• 2:21
  Speaker 1: maybe should have invested in. So there's certainly that's been
• 2:23
  Speaker 1: the criticism for many years from the likes of the
• 2:26
  Speaker 1: I m F, that they actually could be spending more,
• 2:29
  Speaker 1: particularly on public investment. That is indeed the case the
• 2:35
  Speaker 1: Germany has lagged other European countries, other advanced economies in
• 2:40
  Speaker 1: public investment. The infrastructure is not what it used to be.
• 2:45
  Speaker 1: The train services a catastrophe, Wireless internet reception is very patchy,
• 2:51
  Speaker 1: so there are indeed issues which they could have addressed
• 2:55
  Speaker 1: and possibly haven't addressed. And there are definitely economists in
• 3:00
  Speaker 1: Germany who say that this, this penny penny pinching approach
• 3:06
  Speaker 1: has essentially thwarted the economy in the long term by
• 3:10
  Speaker 1: giving it enough enough infrastructure to actually support economic activity,
• 3:17
  Speaker 1: and it is I was very struck just looking at
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  Speaker 1: the numbers a while ago that the public investment is
• 3:21
  Speaker 1: a share of GDPs even less than the US, and
• 3:23
  Speaker 1: we think of the US as being a great, huge,
• 3:26
  Speaker 1: the most greatest example of a place that doesn't invest
• 3:30
  Speaker 1: enough in its roads and other things. I guess the
• 3:33
  Speaker 1: German response would be, and has been in fact in
• 3:36
  Speaker 1: the last week or so, that the fact that they
• 3:39
  Speaker 1: were so frugal in the past has now given them
• 3:42
  Speaker 1: the capacity to really open the floodgates when it comes
• 3:45
  Speaker 1: to supporting the economy now, and we worry that countries
• 3:49
  Speaker 1: like Italy for example, maybe don't have that same capacity.
• 3:54
  Speaker 1: That is exactly right. The Germany Germans have unveiled some
• 3:58
  Speaker 1: of the biggest fiscals simulus programs of any advanced economy,
• 4:02
  Speaker 1: and then of course there is also the additional Pan
• 4:06
  Speaker 1: European package announced in Brussels last week. Italy obviously has
• 4:11
  Speaker 1: less firepower because it's public finances are in a more
• 4:15
  Speaker 1: precurious place, which is exactly why, of course there are
• 4:19
  Speaker 1: now calls for um jointly issued debt to help rebuild economies.
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  Speaker 1: I mean, if we step back, I guess if you
• 4:30
  Speaker 1: think about six months or nine months ago, where Mario
• 4:32
  Speaker 1: drug left the European Central Bank, one of his final
• 4:36
  Speaker 1: salvos was to have again a call for looser fiscal
• 4:40
  Speaker 1: policy in the Eurozone, particularly the likes of Germany, who
• 4:44
  Speaker 1: had strong public finances. You know, one way or another,
• 4:49
  Speaker 1: we have got that, and indeed at active fiscal policy
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  Speaker 1: in Europe is helping to supplement what the European Central
• 4:56
  Speaker 1: Bank can do. So I guess we have sort ended
• 5:00
  Speaker 1: up in the right place. Even if we were that
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  Speaker 1: maybe Germans are going to be drawing different lessons from
• 5:06
  Speaker 1: it than maybe others might do. That is exactly right
• 5:10
  Speaker 1: in the sense that there there you know, work halls
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  Speaker 1: to spend there. Obviously there is a big analysis and
• 5:17
  Speaker 1: in terms of the fiscal spillovers, exactly how big they
• 5:21
  Speaker 1: would be from German investment into other countries is a
• 5:25
  Speaker 1: matter of the late among economists. But we definitely do
• 5:30
  Speaker 1: have the the big, big spending now and there are
• 5:35
  Speaker 1: indeed calls in Germany for more spending down the road
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  Speaker 1: as part of this new green deal that you know
• 5:44
  Speaker 1: that has been proposed by the EU. Well, it's going
• 5:47
  Speaker 1: to be interesting. I just I can't help thinking there
• 5:49
  Speaker 1: are so many things that will get changed by this crisis,
• 5:52
  Speaker 1: but I can't help thinking we will have this. We're
• 5:54
  Speaker 1: having all the same conversations about Germany needing to have
• 5:57
  Speaker 1: LUCI policy for many is to come, despite what we've
• 6:01
  Speaker 1: seen in the last few weeks. Catherine Bosby, thanks very much. Well.
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  Speaker 1: I'm delighted to be joined now by Geter Goppenough, the
• 6:15
  Speaker 1: chief economist of the International Monetary Fund, sitting in Washington,
• 6:20
  Speaker 1: D C. Geter, You've just produced the Funds new forecast
• 6:23
  Speaker 1: for the global economy this week. Obviously it's a big
• 6:26
  Speaker 1: change from the last time when you went through that
• 6:28
  Speaker 1: process at the beginning of the year. What I found
• 6:31
  Speaker 1: particularly striking looking at these forecasts was that your baseline
• 6:35
  Speaker 1: scenario for the world was also the most optimistic one,
• 6:38
  Speaker 1: when often with forecasts you have a baseline and then
• 6:41
  Speaker 1: you have how things have might go well or things
• 6:43
  Speaker 1: might go badly. But right now you're really only looking
• 6:46
  Speaker 1: at how things could go badly. Stephanie, I think what
• 6:50
  Speaker 1: you can say is that you should be struck by
• 6:53
  Speaker 1: the uncertainty around the forecast more than anything else. We
• 6:57
  Speaker 1: started constructing this over the last level weeks and as
• 7:00
  Speaker 1: you know are the I m F it's get gets
• 7:02
  Speaker 1: built both bottom up and then top down. So this
• 7:07
  Speaker 1: is a very elaborate process with a hundred and eighty
• 7:09
  Speaker 1: nine member countries. So this estimate reflects that. So another
• 7:12
  Speaker 1: question is you know what kinds of scenarios should we
• 7:16
  Speaker 1: be constructing. And yes, there are some upside risks and
• 7:18
  Speaker 1: we could see that coming about, especially if we have
• 7:21
  Speaker 1: good positive news and therapies and vaccines, But right now,
• 7:25
  Speaker 1: we do think that most of the risks of the downside,
• 7:28
  Speaker 1: and so we elaborate on three scenarios where things can
• 7:31
  Speaker 1: get much voice. And some of those alternative scenarios for
• 7:35
  Speaker 1: the global economy involve the return of the virus in
• 7:39
  Speaker 1: countries after lockdown measures potentially have been lifted or or
• 7:42
  Speaker 1: partially lifted in countries maybe maybe later in the year.
• 7:46
  Speaker 1: Is that something I wonder that you thought more and
• 7:49
  Speaker 1: more about as you've been finalizing these forecasts. So we
• 7:53
  Speaker 1: are you know, our baseline assumes that the pandemic and
• 7:57
  Speaker 1: the containment measures will peak in the second whatever for
• 8:00
  Speaker 1: most countries in the world and then come off gradually
• 8:02
  Speaker 1: in the second half, but clearly that's not given and
• 8:06
  Speaker 1: talking to epidemiologists and public health officials, there's certainly no
• 8:09
  Speaker 1: certainty that will happen. Now, there are some countries where
• 8:12
  Speaker 1: you are seeing containment measures working, and there is you know,
• 8:15
  Speaker 1: flattening of the curve and the number of new cases
• 8:17
  Speaker 1: are coming down, but it's still too early to say,
• 8:19
  Speaker 1: which is why we look into these other scenarios where
• 8:23
  Speaker 1: the containment measures need to go into the second half
• 8:26
  Speaker 1: of this year and even into and if that happens,
• 8:30
  Speaker 1: then it will be uh, you know, doubling of the
• 8:33
  Speaker 1: of the downturn, which is from three percent a negative
• 8:37
  Speaker 1: three percent to negative six percent in twenty and almost
• 8:42
  Speaker 1: no recovery than in one. So it would be much
• 8:45
  Speaker 1: much worse. And what we're looking at is of course
• 8:48
  Speaker 1: already extremely bad. I mean, this new forecast shows a
• 8:51
  Speaker 1: declining global output greater than any in our lifetimes, and
• 8:54
  Speaker 1: certainly greater than the global financial crisis. We should remember that,
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  Speaker 1: I guess this week is when you would usually have
• 9:01
  Speaker 1: finance ministers and central bank governors around the world gathered
• 9:04
  Speaker 1: in Washington for the I m F and the World
• 9:06
  Speaker 1: Bank Spring meetings. In fact, you and I were supposed
• 9:09
  Speaker 1: to be doing this interview in person at the Bloomberg
• 9:11
  Speaker 1: Bureau there, but the meetings are happening virtually and I
• 9:14
  Speaker 1: was struck. One of our reporters, Rich Miller, wrote this
• 9:17
  Speaker 1: week the world's ability to check the coronavirus contagion and
• 9:21
  Speaker 1: fully recover from the worst recession since the Great Depression
• 9:25
  Speaker 1: might depend on what international economic policymakers decide this week.
• 9:29
  Speaker 1: Do you agree that there's that much resting on the
• 9:33
  Speaker 1: meetings happening this week and those conversations. I think it
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  Speaker 1: it really makes a big difference of the international community
• 9:42
  Speaker 1: steps up and and does even more than what they've
• 9:46
  Speaker 1: been doing. Now. You know, there are many advanced economies
• 9:50
  Speaker 1: of the world that have put in a lot of
• 9:53
  Speaker 1: stimulus or fiscal and monetary policy. So we the global
• 9:56
  Speaker 1: economy as a whole, we have about eight trillion dollars
• 9:59
  Speaker 1: of goal stimulus, discretionary physical stimulus in the system, but
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  Speaker 1: it's almost all coming from richer countries and advanced economies.
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  Speaker 1: If you look at emerging markets, developing economies, low income countries,
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  Speaker 1: they're in a really much more difficult situation. I mean,
• 10:17
  Speaker 1: if there's a health crisis, which they have to deal
• 10:19
  Speaker 1: with UH, you know, with worse health systems, and then
• 10:23
  Speaker 1: on the on top of that is the financial crisis
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  Speaker 1: with rapid capital outflows, if your commodity explot as a
• 10:28
  Speaker 1: commodity price collapse and you have high levels of debt.
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  Speaker 1: So their abilities to do the kind of spending that's
• 10:35
  Speaker 1: needed at this point, given the high dead burdens that
• 10:38
  Speaker 1: they have UH is a major issue. And I think
• 10:41
  Speaker 1: the meetings this time around, how you know, would be
• 10:45
  Speaker 1: addressing those would would be addressing that particular concern and
• 10:49
  Speaker 1: how countries and how the international community can step up
• 10:52
  Speaker 1: to provide consertual financing, death relief and aid. There is
• 10:57
  Speaker 1: already what we would normally consider to be a pretty
• 10:59
  Speaker 1: large hot for you to tap into to help countries
• 11:03
  Speaker 1: through this. But when we look at what advanced economies
• 11:06
  Speaker 1: have done, I mean, their governments are having to take
• 11:09
  Speaker 1: much bigger steps, much faster than they might previously had
• 11:13
  Speaker 1: to consider, are you going to need even more to
• 11:16
  Speaker 1: give emerging economies and developing countries the help they need?
• 11:18
  Speaker 1: They so, how are you going to get it? So
• 11:21
  Speaker 1: with you know, advanced economies, they have put a lot
• 11:25
  Speaker 1: in the system. I think one of these things about
• 11:28
  Speaker 1: this crisis is because of so much of uncertainty, you know,
• 11:34
  Speaker 1: you have to have the ability to speedly recalibrate what
• 11:37
  Speaker 1: you're what you're going to spend, and what even the
• 11:39
  Speaker 1: design of the policies. So again I think you know,
• 11:42
  Speaker 1: to tell you what a number for them would be
• 11:44
  Speaker 1: difficult at this point. But the plus side is that
• 11:48
  Speaker 1: you see monetary policy and physical policy now working together
• 11:52
  Speaker 1: in many countries. In the US, you have you know,
• 11:55
  Speaker 1: monetary policy that's providing support that's being back stopped by
• 11:59
  Speaker 1: the Treasury, and you see that in other parts of
• 12:01
  Speaker 1: the world too, So this kind of coordination is absolutely helpful.
• 12:05
  Speaker 1: I mean, interest rates are still very low in many
• 12:08
  Speaker 1: parts of the world now. I think for other countries,
• 12:12
  Speaker 1: we've estimated that if you're looking at emerging marketing developing economies,
• 12:16
  Speaker 1: they would need about two and half trillion dollars to
• 12:20
  Speaker 1: deal with their bounds of payments needs. And that's not
• 12:23
  Speaker 1: something that they can entirely meet on their own. They
• 12:26
  Speaker 1: have a significant amount of reserves and those would help,
• 12:29
  Speaker 1: but they will need its support from the international community
• 12:32
  Speaker 1: here well, often you make new policy in moments of crisis.
• 12:36
  Speaker 1: I was at the U. S. Treasury during the Asia
• 12:38
  Speaker 1: financial crisis in the late nineties and there were some
• 12:41
  Speaker 1: new facilities that came out of that, for example, a
• 12:44
  Speaker 1: new contingent credit line for countries to get support through
• 12:47
  Speaker 1: the quidity crisis without the usual stigma of going to
• 12:51
  Speaker 1: the I m F. Do you think we'll need that
• 12:54
  Speaker 1: kind of innovation or new facility with this crisis or
• 12:58
  Speaker 1: is it just about scale up very quickly what you
• 13:01
  Speaker 1: and the World Bank already have. I think both of
• 13:04
  Speaker 1: it is happening. You need you need Uh, innovation here
• 13:08
  Speaker 1: and you need scaling up. You know, you saw that.
• 13:11
  Speaker 1: You know, some of the major central banks are extending
• 13:13
  Speaker 1: swap lines to other countries to help with the dollar
• 13:17
  Speaker 1: liquidity problems at the I m F. You know, we've
• 13:21
  Speaker 1: had close to a hundred countries come to us for
• 13:24
  Speaker 1: financing needs in the last four weeks. I mean a
• 13:28
  Speaker 1: total of about a hundred. So it's a very large
• 13:31
  Speaker 1: number coming in a very shortly. I don't think we've
• 13:33
  Speaker 1: had a hundred countries come to us before, so this
• 13:35
  Speaker 1: is unprecedented. And then of course the speed of it
• 13:38
  Speaker 1: is even more unprecedented. Uh. And what we've had to
• 13:42
  Speaker 1: do is that to meet their needs, we figured that
• 13:46
  Speaker 1: we need to increase their access to access to rapid
• 13:49
  Speaker 1: financing facilities right as opposed to the ones for which
• 13:52
  Speaker 1: there's a long process of review and long drawn program.
• 13:56
  Speaker 1: And so we have done That's one of the major
• 13:58
  Speaker 1: stuffs we've taken easy who increase that access to levels
• 14:02
  Speaker 1: where we think about now a hundred billion, which we
• 14:04
  Speaker 1: think would be enough given the kinds of demands that
• 14:08
  Speaker 1: we're seeing. And then the second piece, of course, is
• 14:11
  Speaker 1: that we want countries, low income countries to be able
• 14:14
  Speaker 1: to do the necessary spending on on health that's needed
• 14:18
  Speaker 1: in this crisis, or kind of medical supplies and so one.
• 14:22
  Speaker 1: And you know, the last thing we want them is
• 14:24
  Speaker 1: that instead of doing that, that they're actually servicing their
• 14:27
  Speaker 1: death to the i MP. So we are also in
• 14:30
  Speaker 1: the process of providing death service relief to many countries,
• 14:32
  Speaker 1: and we just did that for twenty five low income countries.
• 14:36
  Speaker 1: Many other facilities have been thought of this on on.
• 14:39
  Speaker 1: We're thinking about newer short term liquidity lines for countries.
• 14:44
  Speaker 1: That's another piece that would matter, maybe even more for
• 14:46
  Speaker 1: emerging markets. So there are the kinds of facilities that
• 14:51
  Speaker 1: we are thinking about, and I think it will be
• 14:52
  Speaker 1: important more generally for the for the even for other
• 14:55
  Speaker 1: creditors and other international institutions to do the same. Now,
• 15:04
  Speaker 1: I wonder if we could step back to what you
• 15:07
  Speaker 1: might be writing about in your world economic outlook in
• 15:09
  Speaker 1: maybe a year or two time. I mean, one of
• 15:12
  Speaker 1: the debates that the i m F had highlighted recently
• 15:16
  Speaker 1: and we've thought about a lot on this program, is
• 15:19
  Speaker 1: whether the exceptional measures taken during and since the global
• 15:23
  Speaker 1: financial crisis had left governments with enough ammunition to respond
• 15:27
  Speaker 1: to the next crisis. We talked about the lack of
• 15:29
  Speaker 1: policy space, but now we're in that next crisis. Of course,
• 15:33
  Speaker 1: we didn't know what it was going to look like,
• 15:35
  Speaker 1: and governments in advanced economies have been able to do
• 15:38
  Speaker 1: a lot with monetary and fiscal policy. So do you
• 15:41
  Speaker 1: think we've learned that there was more policy space than
• 15:43
  Speaker 1: we thought or is it just that these extraordinary circumstances
• 15:47
  Speaker 1: have kind of created space for governments to undertake a
• 15:51
  Speaker 1: level of spending we wouldn't have previously thought they could do.
• 15:55
  Speaker 1: But it's definitely I think when we were flagging, um,
• 15:58
  Speaker 1: you know, not so long oh, was that you know,
• 16:01
  Speaker 1: monetary policy cannot be the only game in town, and
• 16:05
  Speaker 1: next time something goes wrong, fiscal policy will have to
• 16:07
  Speaker 1: play a bigger role. I don't think we predicted that
• 16:11
  Speaker 1: that would be even more the case because this time around,
• 16:14
  Speaker 1: in terms of targeting the measures and getting it to
• 16:17
  Speaker 1: the right people, fiscal policy really has to play a
• 16:20
  Speaker 1: big role. And that's what we've seen this time around,
• 16:22
  Speaker 1: which is we have seen fiscal policy stepping up in
• 16:25
  Speaker 1: many parts of the world. Uh and and working with
• 16:29
  Speaker 1: monetary policy to have the biggest impact. So I so I,
• 16:33
  Speaker 1: you know, so that is in line with what we
• 16:35
  Speaker 1: had expected. I think a second lesson we should probably
• 16:37
  Speaker 1: learn is the importance of automatic stabilizers, which is, countries
• 16:42
  Speaker 1: that have much you know, better built in automatic stabilizers
• 16:47
  Speaker 1: can respond to these crisis much more fastly because the
• 16:49
  Speaker 1: speed with which all of this happens. If you don't
• 16:52
  Speaker 1: have the infrastructure in places, you don't have the systems
• 16:54
  Speaker 1: in place to deliver income support to people, then you
• 16:58
  Speaker 1: know you have a harder time getting out of the crazies.
• 17:01
  Speaker 1: And so automatic civilizers, I think are another big factor.
• 17:05
  Speaker 1: So I guess we should just explain more automatic stabilizers there.
• 17:08
  Speaker 1: That's the bit of fiscal policy that works without government's
• 17:10
  Speaker 1: having to do anything. So if you if you enter
• 17:12
  Speaker 1: a recession, your economy shrinks, your tax revenues automatically go down,
• 17:16
  Speaker 1: and your public spending on things like unemployment benefits automatically
• 17:19
  Speaker 1: goes up. That's the automatic stabilizers. But all of the
• 17:22
  Speaker 1: fiscal policy support, at least in advanced economies, has been
• 17:26
  Speaker 1: about trying to prevent their being permanent costs from this
• 17:30
  Speaker 1: shutdown in economies, so preventing companies that are otherwise viable
• 17:35
  Speaker 1: from going bust and stopping people going into unemployment who
• 17:39
  Speaker 1: might otherwise have just been able to stay in work
• 17:41
  Speaker 1: and whose jobs are viable. But at this point, do
• 17:44
  Speaker 1: you think advanced economies have done as much as they
• 17:47
  Speaker 1: can do to minimize that long term damage from this crisis?
• 17:51
  Speaker 1: How optimistic are you? I think there is a substantial
• 17:56
  Speaker 1: risk in that. You know, this is a crisis that's
• 17:59
  Speaker 1: helped and that's affecting small and medium enterprises along with
• 18:04
  Speaker 1: some of the big ones. Uh, and getting to them
• 18:07
  Speaker 1: is much harder when you have a deep procession of
• 18:10
  Speaker 1: this kind. He tends to leave scars, you know, in
• 18:13
  Speaker 1: terms of job losses, in terms of firms that go
• 18:16
  Speaker 1: out of business and take much longer to come back.
• 18:19
  Speaker 1: There are gonna be issues with you know, private sector
• 18:23
  Speaker 1: balance sheets, public sector balance sheet. So I think there
• 18:26
  Speaker 1: is a lot to be concerned about here. I mean,
• 18:29
  Speaker 1: another thing I would like to want to flag is
• 18:32
  Speaker 1: that while in the past, when there's been a crisis
• 18:34
  Speaker 1: and you have all the stimulus in the system, it
• 18:37
  Speaker 1: is a stimulus, which is you want people to go
• 18:39
  Speaker 1: out and spend, you want firms to invest now, But
• 18:42
  Speaker 1: that's not what the other side of this crisis is,
• 18:45
  Speaker 1: which is the health crisis, and so at the same time,
• 18:48
  Speaker 1: all of the stimulus is in the system. We want
• 18:50
  Speaker 1: people to stay at home and not exactly lot and spend,
• 18:54
  Speaker 1: So it's a very different transmission channel this time around.
• 18:57
  Speaker 1: The hope is that you will keep people with sufficient
• 19:01
  Speaker 1: income so that they can meet their needs, that farms
• 19:05
  Speaker 1: and businesses can stay afloat that once we get past
• 19:08
  Speaker 1: this period of lockdown, that that things would would recover
• 19:13
  Speaker 1: much faster. But I mean, the economic landscape will look
• 19:16
  Speaker 1: very different once we come out of this lockdown. And
• 19:18
  Speaker 1: I think there's from medicine certainty, I wonder. I mean,
• 19:22
  Speaker 1: you're right that this is a different kind of stimulus
• 19:24
  Speaker 1: because a lot of the money being spent isn't by definition,
• 19:28
  Speaker 1: can't stimulate the economy right now, We're not people can't
• 19:31
  Speaker 1: spend it necessarily. It can only hend hold the economy
• 19:35
  Speaker 1: and suspended animation. Do you think that when the economy
• 19:38
  Speaker 1: does come back and people can go out and spend,
• 19:41
  Speaker 1: but we might actually see some of inflation Finally, as
• 19:44
  Speaker 1: a result of all this fiscal spending. I think the
• 19:49
  Speaker 1: money that's being handed out, though the overall number looks large,
• 19:53
  Speaker 1: it's for an individual household. It's a small amount. I
• 19:56
  Speaker 1: think this is more of US sustainments as opposed to
• 19:58
  Speaker 1: having excess of funding. No. You know, based on our projections,
• 20:03
  Speaker 1: we are looking at economic activity being below potential for
• 20:08
  Speaker 1: several quarters, and with that we you know, cannot expect
• 20:12
  Speaker 1: to see inflationary pressures um any time soon. It's one
• 20:17
  Speaker 1: final subject I wanted to touch on that the I
• 20:20
  Speaker 1: m F has put a lot of more focus on
• 20:22
  Speaker 1: over the last few years, and that's the relationship between
• 20:24
  Speaker 1: inequality and the economy and the economic damage that comes
• 20:28
  Speaker 1: from inequality as well as the social damage. I think
• 20:32
  Speaker 1: a lot of those costs have been brought home very
• 20:35
  Speaker 1: dramatically in this crisis. I mean, we've seen such a
• 20:38
  Speaker 1: difference between the situation of people working for large companies
• 20:41
  Speaker 1: or traditional companies and the situation of people at the
• 20:44
  Speaker 1: fringes of the labor market, for example, who are not
• 20:46
  Speaker 1: only on low incomes but potentially in the gig economy
• 20:49
  Speaker 1: with no job security and now no income. Do you
• 20:53
  Speaker 1: think we might see a rare evaluation of the role
• 20:56
  Speaker 1: of the state coming out of this, and maybe a
• 20:58
  Speaker 1: greater focus on providing rights, providing a safety net for
• 21:03
  Speaker 1: those parts of the workforce that turned out to be
• 21:05
  Speaker 1: so vulnerable to this crisis. I mean, for countries to
• 21:09
  Speaker 1: come out of this really grim situation, and this is
• 21:12
  Speaker 1: true for all countries in the world. It's going to
• 21:14
  Speaker 1: be important to get everybody to be able to survive
• 21:19
  Speaker 1: this crisis and to come out whold at the other end.
• 21:24
  Speaker 1: And so, you know, having this kind of inequality which
• 21:29
  Speaker 1: leads to permanent losses of income people coming up saying
• 21:33
  Speaker 1: out of the labor force where they can't maintain basic
• 21:36
  Speaker 1: livelihoods doesn't help anybody. It doesn't help. It doesn't help
• 21:40
  Speaker 1: even from a just a pure growth perspective. So I
• 21:43
  Speaker 1: think absolutely, I think it's very important for the world
• 21:46
  Speaker 1: to ensure that there are again I would just automatic
• 21:51
  Speaker 1: systems in place that get triggered whenever something like this
• 21:54
  Speaker 1: happens to ensure that people get the support that they
• 21:56
  Speaker 1: need and also to make sure that in normal times
• 22:00
  Speaker 1: that there is an equitable distribution of income in the world.
• 22:06
  Speaker 1: I'm sorry I said that was the last one, but
• 22:08
  Speaker 1: actually I do have one other question because I realized
• 22:10
  Speaker 1: I'm talking to you and I'm also reading the analysis
• 22:12
  Speaker 1: of our India economist Abishek Gupta about the impact of
• 22:16
  Speaker 1: the lockdown in India. As someone who is very familiar
• 22:20
  Speaker 1: with the Indian economy, I'm just thinking about the kind
• 22:23
  Speaker 1: of lockdown that's now being attempted there, what that means
• 22:26
  Speaker 1: for the economy. Do you feel that there's enough understanding
• 22:30
  Speaker 1: of the implications of that for a country such as
• 22:32
  Speaker 1: India with its enormous slum population and informal economy. Are
• 22:37
  Speaker 1: there enough programs there to prevent this kind of shutdown
• 22:41
  Speaker 1: being cataclysmic for a big chunk of the Indian population. Well,
• 22:46
  Speaker 1: it is essential to do what we're seeing there, and
• 22:49
  Speaker 1: I think it's the Indian government was right to UH
• 22:52
  Speaker 1: to move speedily and put these kinds of lockdowns in place,
• 22:58
  Speaker 1: you know, who have to make sure that this crisis
• 23:01
  Speaker 1: doesn't spiral out of control. Now, this has unfortunately had
• 23:06
  Speaker 1: a big effect on UH daily wage workers, and you've
• 23:10
  Speaker 1: seen this with migrant laborers who are going back to
• 23:13
  Speaker 1: the villages. And you know, this requires at the same
• 23:16
  Speaker 1: time as you're putting this containment in place, it requires
• 23:19
  Speaker 1: that the government supplies food transfers in kind, but also
• 23:24
  Speaker 1: cash transfers, and they they are doing several things in
• 23:28
  Speaker 1: this dimension. They are providing a relief to a lot
• 23:32
  Speaker 1: of workers, and I expect that they will do more
• 23:36
  Speaker 1: going forward. Enough, Chief Economists of the I m F,
• 23:40
  Speaker 1: thank you very much, Thank you, Sethny, thanks for listening
• 23:48
  Speaker 1: to Stephanomics. We'll be back next week with more on
• 23:51
  Speaker 1: how COVID nineteen is affecting the global economy. And remember
• 23:54
  Speaker 1: you can always find us on the Bloomberg terminal, website,
• 23:57
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• 24:00
  Speaker 1: and analysis during the week from Bloomberg Economics, you can
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  Speaker 1: follow as Economics on Twitter. You can also find me
• 24:07
  Speaker 1: on at my Stephanomics. This episode was produced by Magnus Hendrickson,
• 24:11
  Speaker 1: with special thanks to get Gopinath and Katherine Bosley. Scott
• 24:14
  Speaker 1: Lamman is the executive producer of Stephanomics and the head
• 24:17
  Speaker 1: of Bloomberg Podcasts is Francesca Levi.