IMF sees turmoil as pandemic rages on

The world is in desperate need of cooperation and unity to pull out of the coronavirus pandemic and begin what the IMF has termed the "long, difficult ascent" right as its leaders are increasingly focused on nationalism and decoupling.

Driving the news: The IMF raised its 2020 global growth outlook, largely because of improved expectations for China, but cut its longer-term forecast, citing slower growth. Policymakers expressed worries about a number of "setbacks" that could hobble its diminished forecast with potentially significant "scarring" in the long term.

• "The scarring is expected to compound forces that dragged productivity growth lower across many economies in the years leading up to the pandemic — relatively slow investment growth weighing on physical capital accumulation, more modest improvements in human capital, and slower efficiency gains in combining technology with factors of production," IMF leaders said in the latest World Economic Outlook.
• "The uncertainty surrounding the baseline projection is unusually large."

What we're hearing: "I worry most about withdrawing support to workers and firms prematurely because it could cause a wave of bankruptcies and massive increase in unemployment," IMF head Kristalina Georgieva said during a media briefing Wednesday.

• "We are advising all governments, 'Do as much as you can, don’t cut financial lifelines too early.'"

By the numbers: Already, the World Bank has warned the pandemic will push an additional 88 million to 115 million people into extreme poverty this year, with the total rising to as many as 150 million by 2021.

The big picture: Without global leadership on the issue from either of the world's two largest economies, the IMF and World Bank have attempted to fill the void but are already far overextended for a crisis that is just beginning in much of the developing world.

• Since March, the IMF has provided "10 times" as much economic support to the world's developing countries as it does in a normal year, Georgieva said.
• The Fund is calling for multilateral efforts to reduce the debt held by developing countries, an effort that has so far fallen on mostly deaf ears in China and at asset management firms in the U.S. and Europe.

The bottom line: For many countries, the immediate shock and bounce that has followed over the past few months has been the light work.

• Now comes "the really hard part of the recovery," Brian Coulton, chief economist at Fitch Ratings, said during a presentation for the Institute of International Finance's annual meeting Tuesday.
• "We’ve got another 18 months ahead, at least."