Mario Marcel: Monetary policy challenges facing emerging countries amid the Covid-19 pandemic

Presentation by Mr Mario Marcel, Governor of the Central Bank of Chile, at a Webinar organised by Banco Itaú, Santiago de Chile, 24 June 2020.

The views expressed in this speech are those of the speaker and not the view of the BIS.

1. The Covid-19 pandemic has unfolded into a global crisis that has left no country unscathed. The economic effects are unprecedented in their origin, size, speed, and simultaneity across the world.

2. While non-pharmacological containment strategies vary across countries given the unknown nature of the virus, almost all of them have included social distancing and lockdown measures that have hit hard on economic activity. Global GDP is likely to lose some 8% to the crisis this year, which will take long to recover-if ever.

3. Economic policy has focused on limiting widening gaps in operational balances of firms and in disposable income of households, with credit called in to cover part of the remaining gap. This would prevent a liquidity problem turning into a solvency one, with the attached string of bankruptcies and long-term unemployment, which would make it much more difficult.