Public investment key to economies’ recovery

WASHINGTON — Public investment should play a "central role" in the recovery of both emerging and advanced economies from the coronavirus downturn, the International Monetary Fund (IMF) said on Monday ahead of its fall meetings.

Stepping up such spending with interest rates low globally could "create millions of jobs directly in the short term and millions more indirectly over a longer period", officials with the International Monetary Fund wrote in a blog post.

Assuming investments are of "high quality", the Washington-based crisis lender said increasing public investment by 1 per cent of gross domestic product (GDP) could raise private investment by 10 per cent, employment by 1.2 per cent, GDP by 2.7 per cent along with overall confidence in the recovery.

The coronavirus pandemic has caused a sharp economic downturn globally, but even before the pandemic the IMF said public investment "had been weak for over a decade, despite crumbling roads and bridges in some advanced economies and massive infrastructure needs for transportation, clean water, sanitation" in poorer countries.

The time to invest is now, officials said, with many countries still fighting off COVID-19 and people who lost their job amid the downturn looking for work.

The IMF estimates two to eight jobs are created for every $1 million spent on traditional infrastructure, and 5 to 14 for every $1 million spent on research, development and green technology.

While encouraging countries to maintain existing infrastructure, the IMF encouraged governments to take a second look at projects that had been delayed in the past and plan new ones focused on their needs after the pandemic is over.