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Containing coronavirus spread comes with economic tradeoffs, says IMF blog

Success in containing the virus comes at the price of slowing economic activity, the IMF said in a blog.

PTI|
Last Updated: Mar 21, 2020, 06.22 AM IST
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The IMF said the past weeks have shown how a health crisis, however temporary, can turn into an economic shock where liquidity shortages and market disruptions can amplify and perpetuate.
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NEW DELHI: Success in containing coronavirus infection comes at the price of slowing economic activity, a blogpost by IMF experts has stated.

With the number of coronavirus cases rising in India, Prime Minister Narendra Modi has appealed to citizens to observe a 'Janta curfew' on Sunday to check the spread of deadly novel coronavirus.

In the blogpost, the IMF experts observed, "Success in containing the virus comes at the price of slowing economic activity, no matter whether social distancing and reduced mobility are voluntary or enforced."

The IMF China's experience so far shows that the right policies make a difference in fighting the disease and mitigating its impact-but some of these policies come with difficult economic tradeoffs, the blog authored by Helge Berger - IMF's China mission chief and Assistant Director, Kenneth Kang - Deputy Director in the Asia & Pacific Department of the IMF, and Changyong Rhee - Director of the IMF's Asia and Pacific Department, stated.

"By all indications, China's slowdown in the first quarter of 2020 will be significant & will leave a deep mark for the year," the blog said.

The IMF said the past weeks have shown how a health crisis, however temporary, can turn into an economic shock where liquidity shortages and market disruptions can amplify and perpetuate.

"In China, the authorities stepped in early to backstop interbank markets and provide financial support to firms under pressure, while letting the renminbi adjust to external pressures.

Among other measures, this included guiding banks to work with borrowers affected by the outbreak; incentivizing banks to lend to smaller firms via special funding from China's central bank; and providing targeted cuts to reserve requirements for banks.

"Larger firms, including state-owned enterprises, enjoyed relatively stable credit access throughout-in large part because China's large state banks continued to lend generously to them," the IMF pointed out.

Noting that while there are reassuring signs of economic normalization in China-most larger firms have reported reopening their doors and many local employees are back at their jobs, it said stark risks remain.

"This includes new infections rising again as national and international travel resumes. Even in the absence of another outbreak in China, the ongoing pandemic is creating economic risks," it said.

The number of novel coronavirus cases in India rose to 223 on Friday evening after 50 fresh cases were reported from various parts of the country while 6,700 people who came in contact with the patients are under rigorous surveillance, the Union health ministry said.
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