On Wednesday, August 26, JVI conducted a webinar focusing on financial stability issues, as part of its effort to support our member countries in dealing with the economic consequences of the Corona pandemic.

The webinar on “Macrofinancial Considerations for Assessing the Impact of the COVID-19 Pandemic” started with a presentation by Mr. Kang, Mr. Jeasakul and Ms. Khera of recent IMF work on this topic. Mr. Alexander Morozovag, Head of the Macroeconomic and Forecasting Department (Bank of Russia) and Mr. Michal Horváth, Chief Economist (Central Bank of Slovakia) presented the experience of their respective institutions.

The presenters discussed why a global health shock has unprecedented negative repercussions for the global economy. The macroeconomic impact of COVID-19 started with supply-side disruptions, followed by economic demand contraction, falling household income, rising unemployment, and ultimately a broad-based reduction in private consumption and investment. The sharp tightening of financial conditions at the onset of the COVID-19 crisis has eased in recent months, greatly helped by central bank support. Nevertheless, the financial sector faces substantial challenges including higher default rates, increased provisioning and low profitability. The expected negative impact on credit intermediation will contribute to worsening the outlook for the real economy.

The presenters agreed that the policy priority is saving lives and that the reopening should proceed carefully. Economic policy actions should support the most vulnerable businesses and households and macrofinancial policy measures should mitigate liquidity and solvency stress, mitigating moral hazard with adequate safeguards. In sum, policymakers should stand ready to do whatever it takes to safeguard macrofinancial stability in the post-pandemic era.

The webinar was opened by JVI Deputy Director Holger Floerkemeier, and moderated by Reiner Martin, Lead Economist (JVI).