At the meeting, the IMF assessed that the Covid-19 pandemic has made a significant impact on the Asian economies. According to the IMF's forecast, the Asian economic growth in 2020 will be 0%, much lower than the growth during that during the global financial crisis (4.7%), or during the Asian financial crisis (1.3%). However, the regional economy will have a strong recovery in 2021 with an expected growth of 7.6%. In addition, according to the IMF’s forecasts, the global economic growth in 2020 is expected at -3%, in which, the US will experience negative growth at -5.1%, while the Eurozone, Japan and the UK will also grow negatively at -7.5%, -5.2% and -6.5% respectively; meanwhile, China is expected to grow at 1.2%, and the ASEAN-5 countries will grow at -0.6%. The IMF calls for countries in the region to join hands in implementing comprehensive responses across all sectors, such as: (i) preventing and mitigating the impacts of the coronavirus disease on human health; (ii) implementing targeted supportive measures to build public confidence, (iii) ensuring market operations, (iv) preventing and reducing external pressure, and (v) supporting domestic demand.
Overview of the meeting
Speaking at the meeting, the SBV Deputy Governor Nguyen Thi Hong highly appreciated the IMF for taking timely actions in assisting countries in the process of preventing and responding to the impacts of the epidemic, particularly by doubling the annual limits under the Rapid Credit Facility (RCF) and the Rapid Financing Instrument (RFI) for countries to deal with the pandemic, as well as the Fund's commitments to using the 1 trillion USD loan resources as well as debt relief initiatives for low-income countries in collaboration with the World Bank and other multilateral development banks. The SBV Deputy Governor also spoke highly of the IMF role in coordinating the assistance programs from the international financial institutions in order to ensure support and relief packages to cover all subjects, countries and regions affected by the pandemic, which is getting increasingly complicated throughout the world. In addition, the Deputy Governor also welcomed the Fund’s recent approval of the establishment of a Short-term Liquidity Line (SLL) to support the liquidity for countries at risk of capital fluctuations.
In the context of the regional developing economies facing capital outflows and other actual risks during and after the pandemic, the SBV Deputy Governor suggested that the IMF conduct in-depth studies for countries in various areas, such as capital flow management, early warning mechanism, risk sharing mechanism within the budget, the central bank, the banking system and other stakeholders in supporting small and medium-sized businesses, and solutions to the existing issues such as foreign debt management and private sector debts.
The SBV Deputy Governor proposed that the IMF coordinate with countries and other international organizations to set up a policy framework with a view to restoring the economic growth upon the end of the pandemic. She also requested the IMF to step up its policy advice and technical assistance in order to help countries and regions in leveraging and optimizing the available tools such as capital flow management (CFM), foreign exchange intervention (FXI), and regional liquidity support mechanisms such as CMIM to cope with the disease, ensure liquidity and maintain and strengthen financial stability.
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