The IMF on the day it came forward made recommendations in addressing the unemployment issue caused by the Covid-19 pandemic. According to the IMF, the government should increase public investment to encourage the economy to grow faster.
The global economy was in a state of alarm after the Covid-19 crisis hit the world and had to push some economic sectors such as the services sector to shrink operations. Many people are worried about losing their jobs and the administration is experiencing an increase in debt.
Last June, the IMF forecast a 4.9% contraction in global GDP for 2020. But so far, the contraction will be greater as most governments experience a second wave of infection. On that basis, the IMF suggested the government increase public investment to help the economy recover and create jobs.
For developed economic markets, a 1% increase in public investment of GDP will create 7 million direct jobs and 20-33 million jobs in total. At the same time it also catalyzes private investment as well.
For borrowing countries, they should plan for a gradual increase in public investment and reallocate current spending or find new sources of income.
