WASHINGTON (Pakistan Point News / Sputnik - 04th August, 2020) The International Monetary Fund (IMF) said on Tuesday commodity exporting and tourism-dependent nations will see current account deficits in 2020 due to the COVID-19 crisis although global imbalances may shrink.
"For economies dependent on severely affected sectors, such as oil and tourism, or reliant on remittances, the impact of the crisis has been especially acute, with negative effects on external current account balances expected to exceed 2 percent of GDP that will likely require significant economic adjustment," the IMF said in its 2020 External Sector Report.
At a global level, the IMF said its forecasts for 2020 imply a modest narrowing in current account surpluses and deficits by some 0.3 percent of world GDP, and the picture was still subject to high uncertainty.
"The outlook for external positions remains highly uncertain, with significant risks," the fund said. "A second wave of the crisis, with a renewed tightening in global financial conditions, could narrow the scope for emerging market and developing economies to run current account deficits, further reduce the current account balances of commodity exporters, and deepen the decline in global trade."
To adjust to external shocks, such as the fall in commodity prices or tourism, countries with flexible exchange rates should allow them to adjust as needed, the IMF said, adding that for economies experiencing disruptive balance of payments pressures and without access to private external financing, official financing would help ensure health care spending wasn't compromised.
Tariff and nontariff barriers to trade should also be avoided, especially on medical equipment and supplies, while recent restrictions on trade ought to be rolled back, it added.
