WASHINGTON, Oct. 23 (Xinhua) -- As the global economy is recovering from the COVID-19 pandemic, countries should start working together now to rebuild a greener, digital and more inclusive economy, a senior official of the International Monetary Fund (IMF) has said.
"We must start thinking about how to recover and rebuild the global economy in a high-quality way going forward," Zhang Tao, deputy managing director of the IMF, told Xinhua in a recent written interview on the sidelines of the 2020 annual meetings of the IMF and the World Bank Group.
"We are now at a unique point in our history. We need to grasp the opportunity of getting out of the pandemic to shape an economy of the future that is greener, digital and more inclusive," he said.
While the top priority for governments now is still to contain the pandemic, they can lay the foundation for a more resilient economy by "investing in job-rich, highly productive, and greener activities," Zhang noted.
"In particular, we believe that China will continue to play a very important role in a high-quality global recovery," he said.
In its latest World Economic Outlook report released last week, the IMF projected the global economy to contract sharply by 4.4 percent this year, while expecting China's economy to grow by 1.9 percent for the year. China is the only one of the world's major economies that has registered positive growth from the pandemic.
Zhang said the foremost key takeaway from the just-concluded annual meetings is that "more than ever, we need strong international cooperation -- especially on vaccine development and distribution."
"As IMF Managing Director Kristalina Georgieva said during her press conference, faster progress on medical solutions could speed up the recovery; it could add almost 9 trillion U.S. dollars to global income by 2025," he said, adding that could help both poorer and richer nations.
International cooperation is also critical for many other issues that the global economy is grappling with, including resolving trade and technology tensions, strengthening the global financial safety net, resolving debt crises, and addressing climate change and inequality, Zhang said.
Zhang's comments came as the International Monetary and Financial Committee, which provides strategic direction to the work and policies of the IMF, recently warned that the COVID-19 pandemic threatens to leave long-lasting scars on the global economy, pledging to use all available policy tools to restore growth.
"Our medium-term projections assume that economies will experience scarring from the depth of the recession and the need for structural change, entailing persistent effects on potential output," Zhang said.
These effects include adjustment costs and productivity impacts for surviving firms as they upgrade workplace safety, the amplification of the shock via firm bankruptcies, costly resource reallocation across sectors, and discouraged workers' exit from the workforce, he explained.
In response to these threats, to the extent possible, Zhang suggested policies must focus aggressively on limiting persistent economic damage from this crisis.
"Governments should continue to provide income support to households and work to preventing rising bankruptcies and job destruction through supporting vulnerable but viable firms," he said.
Over time, as the recovery strengthens, Zhang believed that policies should shift to facilitating a reallocation of resources toward sectors that are growing, like e-commerce, and away from sectors that are shrinking. At the same time, retraining and other support to workers affected by such transitions would be essential.
"A public green infrastructure investment push in times of low interest rates and high uncertainty can significantly increase jobs and accelerate the recovery while also serving as an initial important step towards reducing carbon emissions," he said.
The COVID-19 pandemic has also pushed global public debt to an all-time high, which is estimated to reach about 100 percent of global gross domestic product (GDP) by the end of 2020, according to the IMF.
"Even before the crisis, about half of low-income countries and several emerging market economies were already in or at high risk of a debt crisis, and the further rise in debt is alarming," Zhang said.
"While many advanced economies still have the capacity to borrow, emerging markets and low-income countries face much tighter limits on their ability to carry additional debt," he said, noting many of these countries could "suffer a second wave of economic distress," triggered by defaults, capital flight and fiscal austerity.
Zhang said the IMF has approved over 100 billion dollars for 81 countries since the start of the pandemic, and the Fund remains adequately resourced with a lending capacity of around 1 trillion dollars to support members in managing the economic and social fallout of COVID-19.
"The IMF has been at the center of the global financial safety net and has leaned forward with our policy advice, capacity development, and financial resources," he said.
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