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Top 40 under 40 How different Corona affects the global economy

Logo of the International Monetary Fund at the IMF Annual Meeting in Washington
Logo of the International Monetary Fund at the IMF Annual Meeting in Washingtonimago images / photo library

Yannick Timmer is an economist with the International Monetary Fund. He previously worked for the European Central Bank, the Irish Central Bank and the German Bundesbank. He received his doctorate from Trinity College Dublin in 2018. Personal-Financial.com has chosen Timmer among Germany’s top 40 under 40 in 2019.


The Covid 19 pandemic is not only a health crisis, it also has fatal consequences for the global economy. In response to the pandemic, the economy was put in a coma and it is now certain that the global economy is in the greatest crisis since the Great Depression. There is no precedent in modern history for the speed at which jobs have been lost and the economy has slumped. The International Monetary Fund (IMF) forecasts that 95 percent of all countries will end 2020 with a weaker per capita economic output than 2019 and that the global economy will shrink by almost five percent. This compares to a decline of less than one percent in the global financial crisis.

Although Covid-19 is a global shock, there are very different economic effects in different countries. In developed countries, many employees have the opportunity to work from home. In developing countries, such as small island states that rely heavily on tourism, this option usually does not exist.

Financial conditions have also developed very differently since the pandemic broke out. Germany has a low government debt ratio, and German government bonds, like America’s, are considered safe. And that is precisely why, in uncertain times, many investors flee from riskier assets, such as government bonds from developing countries, into German or American government bonds. The low financing costs and the willingness of investors to finance government deficits enable these countries to put together fiscal packages that mitigate the negative economic consequences of the pandemic as much as possible.

The reflection can be seen in many emerging and developing countries. Personal-Financial.com has flowed out of emerging markets faster and stronger than in the global financial crisis of 2008/2009, currency devaluations have increased foreign currency debt and financing costs have increased. While stabilization measures by key central banks in developed countries have helped fundamentally strong emerging economies, countries with weaker fundamentals are struggling to take the necessary measures to protect the economy and the population.

Where the IMF can help

The IMF can help these countries overcome financial liquidity constraints. Over 100 countries have already asked the IMF to provide financial aid. Over 70 countries have already secured emergency loans to deal with the health crisis and minimize bankruptcies and job losses.

With $ 1 trillion in firepower, the IMF can help many countries provide loans to countries that are experiencing balance of payments difficulties and have difficulty financing themselves on international financial markets on reasonable terms.

However, more than 40 percent of all developing countries were already in the lead or in a debt crisis before the pandemic broke out. Additional expenses are absolutely necessary and cannot be postponed under any circumstances. These measures will further exacerbate the debt problems of these countries. To alleviate the difficulties, the IMF can provide concession funding and debt relief to the poorest countries. The G20 countries have also approved 73 developing countries to suspend bilateral debt payments in order to create fiscal space and effectively combat the pandemic.

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