Governments should step up public investments to create jobs that boost local economies, IMF says

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The IMF predicted in June a contraction of 4.9% in global GDP (gross domestic product) for 2020 — but the fall could
be even higher as many governments are now dealing with a second wave of infections.

Now, the IMF is calling on governments to increase public investment to aid an economic recovery and create jobs.

The IMF suggested that more money should go into healthcare, social housing, digitalization and environmental protection.

Governments should step up public investments to boost their economies after the massive shock from the coronavirus pandemic, the International Monetary Fund said on Monday.

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The global economy has been severely damaged by the health crisis with the services sector coming to a halt, many people fearing for their jobs, and governments experiencing soaring debt levels.

The IMF predicted in June a contraction of 4.9% in global GDP (gross domestic product) for 2020 — but the fall could be even higher as many governments are now dealing with a second wave of infections. Now, the IMF is calling on governments to increase public investment to aid an economic recovery and create jobs.

“For advanced and emerging market economies … Increasing public investment by 1 percent of GDP in these economies would create 7 million jobs directly, and between 20 million and 33 million jobs overall when considering the indirect macroeconomic effects,” the fund said in a chapter of its latest Fiscal Monitor.

Calculating the “amplifying effects of public investment” in periods of high uncertainty, the IMF said that increasing public investment by 1% of GDP “could strengthen confidence in the recovery and boost GDP by 2.7 percent, private investment by 10 percent, and employment by 1.2 percent” after two years “if investments are of high quality and if existing public and private debt burdens do not weaken the response of the private sector to the stimulus.”

When governments step up their public investments, they signal their “commitment to growth and stability” and that tends to boost private investment too, the IMF added.
Even with social distancing, public investment is feasible and can be delivered quickly.
IMF

For countries with easy access to finance, “borrowing to finance public investments of good quality will be an effective strategy because the global decline in interest rates has set a lower bar for investment projects to be beneficial,” the IMF said.

Nations that are struggling to borrow should plan for a gradual increase in public investments and may need to re-allocate current spending or find new sources of revenue, the institution led by Kristalina Georgieva said.
Where should the money go?

The IMF suggested that more money should go into health care, social housing, digitalization and environmental protection.

It added that investing in digital infrastructure will be “essential” so governments can promote social distancing while also narrowing the digital divide within their societies.

“Even with social distancing, public investment is feasible and can be delivered quickly if governments take four steps,” the IMF said.

These include investing immediately in maintenance; reviewing and restarting promising projects; speeding up projects in the pipeline to bring them to fruition within the next two years; and starting to plan for new projects aligned with their post-crisis priorities.

Godwin Okafor
Godwin Okaforhttps://naija247news.com
Godwin Okafor is a veteran Financial Journalist, Internet Social Entrepreneur, and the visionary Founder of Naija247news Media Limited. With an extensive career spanning over 16 years in financial journalism, Godwin possesses a wealth of experience that seamlessly bridges both traditional and digital media landscapes. His journey in journalism commenced at Business Day, Nigeria, where he laid the foundation for his prolific career. In 2010, Godwin took a bold step by founding Naija247news Media, a platform that has since become a prominent player in delivering timely and accurate news. Educationally, Godwin Okafor holds a Bachelor's degree in Industrial Relations and Personnel Management from the prestigious Lagos State University, Ojo, Lagos. His commitment to continuous learning led him to the Lagos Business School, where he further honed his skills. Additionally, he is recognized as a Fellow of the University of Pennsylvania, having successfully completed the Wharton Seminar for Business Journalists. Throughout his illustrious career, Godwin has earned acclaim by winning numerous journalism awards, a testament to his dedication to excellence in reporting. Beyond his role as a Financial Journalist, Godwin Okafor wears the hat of the Chairman at Emmerich Resources Limited, the publishing entity behind Naija247news. His visionary leadership has played a pivotal role in shaping the media landscape and establishing Naija247news as a trusted source of information. Godwin Okafor's multifaceted expertise, commitment to journalistic integrity, and leadership in the realm of business journalism underscore his influential presence in both the media and entrepreneurial spheres.

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