“We envisage a slowdown in the global economy to under two per cent for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” said Richard Kozul-Wright, Director, Division on Globalization and Development Strategies at UNCTAD.
Launching the UNCTAD report as world financial markets tumbled over concerns about supply-chain interruptions from China, and oil price uncertainty among major producers, Mr. Kozul-Wright warned that few countries were likely to be left unscathed by the outbreak’s financial ramifications.
One “Doomsday scenario” in which the world economy grew at only 0.5 per cent, would involve “a $2 trillion hit” to gross domestic product, he said, adding that collapsing oil prices had been “a contributing factor to that growing sense of unease and panic”.
While it was difficult to predict how the international financial markets will react to COVID-19’s impacts “what they do suggest is a world that is extremely anxious”, he said.
“There’s a degree of anxiety now that’s well beyond the health scares which are very serious and concerning.”
Spend now, to avoid meltdown later
To counter these fears, “Governments need to spend at this point in time to prevent the kind of meltdown that could be even more damaging than the one that is likely to take place over the course of the year”, Mr. Kozul-Wright insisted.
Asked about how different countries might react to the crisis including China – where the virus first emerged in December – and the United States, the senior UN economist said that the Chinese Government would likely introduce significant “expansionary measures” – shorthand for increasing spending or tax cuts.
“It will almost certainly do that,” he said. “Will the US Government in an election year, which is where we are…also need to respond in a way other than simply cutting taxes and reducing interest rates? I suspect it will do.”
Turning to Europe and the Eurozone, Mr. Kozul-Wright noted that its economy had already been performing “extremely badly towards the end of 2019”.
Europe facing recession
It was “almost certain to go into recession over the coming months; and the Germany economy is particularly fragile, but the Italian economy and other parts of the European periphery are also facing very serious stresses right now as a consequence of trends over (the last few) days.”
Describing many parts of the Latin American region as similarly vulnerable, he added that Argentina in particular “will be struggling as a consequence of the knock-on effects of this crisis”.
Commodity-rich countries face hit from stronger dollar
So-called Least Developed Countries, whose economies are driven by the sale of raw materials, will not be spared either.
“Heavily-indebted developing countries, particularly commodity exporters, face a particular threat”, thanks to weaker export returns linked to a stronger US dollar, Mr. Kozul-Wright maintained. “The likelihood of a stronger dollar as investors seek safe-havens for their money, and the almost certain rise in commodity prices as the global economy slows down, means that commodity exporters are particularly vulnerable.”
“Ultimately,” Mr. Kozul-Wright added, “a series of dedicated policy responses and institutional reforms are needed to prevent a localized health scare in a food market in Central China from turning into a global economic meltdown”.
Threat of pandemic ‘very real’: Tedros
Although the threat of COVID-19 becoming an official pandemic “has become very real”, the world is “not at the mercy of the virus”, said the World Health Organization (WHO) head, Tedros Adhanom Ghebreyesus, briefing journalists in Geneva on Monday.
He said it was important not to let grim milestones such as passing the infection rate of 100,000 worldwide, sap resolve to contain the disease, stressing that 93 per cent of deaths so far have been in just four countries.
It would be “the first pandemic in history that could be controlled. The bottom line is, we are not at the mercy of the virus”, he added.
Can't solve economy issue without solving COVID-19, says professor – KitchenerToday.com
It’s a classic case of trying not to put the cart before the horse.
There’s no doubt the economic disaster is caused by the COVID-19 pandemic, but an associate political science professor at Brock University indicates you can’t solve the economic crisis without dealing with the health crisis first.
“You can’t have a strong functioning economy if you’ve got the disease running rampant in the community, it just can’t happen,” Blayne Haggart told The Mike Farwell Show on 570 NEWS.
He said economists have been clear on the issue from the beginning, advocating for financial support on the health side and figuring out later how to pay for it.
Haggart said overall, while we started off the pandemic well and saw numbers begin to drop, not enough was done to prepare for fall and winter, such as adequate investments in contact tracing and testing.
He said when it comes down to it, just the mere presence of the virus is causing the economic problem, not the restrictions related to it.
“People are not going to go into shops (as per usual), even if there’s no government intervention, because people don’t want to die,” Haggart added.
“Some people will, but a lot won’t, so businesses are going continue to be depressed up until the moment where the disease finally hits a breaking point, where we’ve got to basically close things down, or everybody gets sick.”
“That’s the kind of roller coaster that we’re on, and the key is to get off it. The longer you wait, though, the more costlier it is to get off the roller coaster.”
Reimagining the global economy for a post-COVID-19 world – Brookings Institution
When the COVID-19 pandemic sent the global economy into a deep recession, it exposed structural weaknesses in economic institutions and highlighted the need for reform. The challenges countries face today are daunting, but this moment should be recognized as an opportunity to build back more sustainable and inclusive economies. David Dollar is joined by three Brookings experts—Eswar Prasad, Marcela Escobari, and Zia Qureshi—to discuss their forward-looking policy proposals for a post-COVID-19 world.
Prasad, Escobari, Qureshi, and Dollar are all contributors to a new report, “Reimagining the global economy: Building back better in a post-COVID-19 world.”
Singapore upgrades third-quarter GDP, sees economy returning to growth next year – TheChronicleHerald.ca
SINGAPORE (Reuters) – Singapore’s economy contracted much less than initially estimated in the third quarter due to gradual easing of COVID-19 lockdown measures and authorities expect the city-state to bounce back to growth next year from its worst recession.
Gross domestic product (GDP) fell 5.8% year-on-year in the third quarter, the ministry of trade and industry said on Monday, versus the 7% drop seen in the government’s advance estimate.
Analysts expected a 5.4% contraction, according to the median of 10 forecasts.
The government said it now expects full-year GDP to contract between 6.5% and 6% versus its prior forecast for a 5% to 7% decline. The country is still facing the biggest downturn in its history.
The economy is expected to grow 4% to 6% next year.
“The recovery of the Singapore economy in the year ahead is expected to be gradual, and will depend to a large extent on how the global economy performs and whether Singapore is able to continue to keep the domestic COVID-19 situation under control,” the MTI said in a statement.
The economy grew 9.2% from the previous three months on a seasonally adjusted basis, compared with the 13.2% contraction in the second quarter. The bounce marked the end of a “technical recession”, as it followed two preceding quarterly contractions.
(Reporting by Chen Lin and Aradhana Aravindan; Editing by Sam Holmes)
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