Trade war bigger threat for emerging markets than COVID crisis: IMF's Gita Gopinath

The shock from trade war brings differential effects for central banks in emerging markets, in contrast with the COVID pandemic, when they could quickly ease monetary policy, the International Monetary Fund's (IMF) Gita Gopinath said.

IMF's first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder. "This time the challenge is going to be greater for them, compared to the pandemic," she said. 

In an interview to the Financial Times, IMF First Deputy Managing Director Gita Gopinath said that in comparison to the coronavirus pandemic, trade war is bigger concern for the emerging markets. Talking about the bleak future outlook, Gopinath said that several emerging markets are potentially at risk of registering significant capital outflows in case the “relative economic prospects and global risk sentiment deteriorate.”

She also highlighted the slowdown in the global trade volumes. On the trade war between the US and China, Gopinath added that the financial hostilities could impact the global supply chain.