Current world economy in the time of pandemic
Farah Faiaz || risingbd.com
Currently, the novel coronavirus is a tangible terror to us. This panic suddenly appeared without telling anyone and giving anyone a chance to get ready.
At the moment, about one-third of the world's people, or about 2.3 billion people, are sitting at home and spending some kind of lazy time. There is no precedent in the history of human civilization for so many people being imprisoned in their homes at the same time, one after the other, for so long.
Everyone is worried about what will happen to the global economy after the epidemic, whether the economy will recover from this fragile state. Many think that the epidemic will subside and everything will be under human control. But the damage that is being done may not be cured at all; and even if it does, it may take a long time.
The massive collapse of almost all major economies in the world since the first week of March is said to be worse than the 2008 financial crisis. Many say it is like ‘The Great Depression’, which began in the 1930's. In the previous two crises, the credit market almost shut down, the stock market plunged 50 percent, and businesses went bankrupt at a massive rate. Unemployment surpassed about ten percent and this whole thing happened over a period of about three years. But this time the economic collapse took place in just three or four weeks after the start of the global epidemic. Breaking all records in history, the US stock market fell 20 percent in just 15 days.
According to the World Bank's forecast, the world's gross domestic product (GDP) will shrink by 3 percent this year. China, the world's second-largest economy, due to the corona virus, is already experiencing a contraction in marginal GDP growth for the first time in decades. The top economies in Europe and North America are also seeing a drop in consumer demand due to the corona. On the other hand, the IMF says that this year, the average world production will decrease by 4.9 percent compared to the previous year. The world's largest economy, the United States, will shrink by 6 percent.
Warwick McCabe and Roshan Fernando have shown six new scenarios of the coronavirus effect on the world economy which are mentioned below.
• In the first scenario, Professor McCabe said that even if the situation was at its best, the global economy would lose up to 14.7 trillion.
• The second and third scenarios assume that the virus exists as it exists now. Sometimes the loss will be less if it decreases, the loss will be more if it increases.
• In the fourth scenario, it is said that if the situation worsens, the economy will lose 21.6 trillion in two years. To make matters worse here, the researchers have assumed that there will be two episodes of acute Covid infection this year and two episodes next year.
• In the fifth scenario, these researchers have considered the situation from 2020 to 2025. The worst case scenario (four severe waves of the virus in two years. Only lockdown measures in the first year) would cost the economy 35.3 trillion in five years.
• In the sixth scenario, if Covid is in its current state, the five-year combined loss of the economy would be 17.5 trillion.
This is about economic contraction. The economic situation can be understood with the income of the people. The economy also depends heavily on consumer spending. In June, the World Bank released the 'Global Economic Prospects 2020'. The agency says the world is in its worst recession in 70 years. This Corona epidemic will cause 8 to 100 million people to become extremely poor this year. Before the epidemic, the World Bank's extreme poverty was defined as a person living on less than 1.90 a day. Now it is being reduced.
According to a United Nations report, the Corona will cause 40 to 60 million people worldwide to become poor. As a result, the goal set by the United Nations to reduce poverty under the “Sustainable Development Goals” by 2030 will be severely challenged. At the same time, due to the lockdown, economic activities in many countries were suspended for six months of the year. Three types of strategies have been adopted to fight the coronavirus and revive the economy, says by the “World Economic Forum”.
1. The first is ‘crush and contain’. This means reducing the number of corona infections to zero. As South Korea has done. The country has imposed sanctions from the beginning. Extensive sample testing reduced the spread of the virus with quarantine in the infected area. New Zealand has also taken rapid lockdown measures to prevent the virus. Has also tested extensive samples.
2. The second strategy is 'flatten and fight'. Flatten & fight is a somewhat long and uncertain strategy. The goal is to reopen the economy in phases so that the healthcare system does not go too far. However, since the virus is not completely gone, countries are at risk of re-emergence in the future and need to issue local lockdowns.
3. The third strategy is 'sustain and support'. Sweden has adopted this strategy. A completely different strategy. It's a lot like that coronavirus infection, but people will be supported if needed. Sweden has kept society and economy largely open. Some restrictions have been imposed to protect the vulnerable elderly population. No steps have been taken to prevent the spread of the virus or to increase immunity.
It is difficult to say which of these three strategies is working. The current situation is very important for the world economy in the next few months. The World Economic Forum thinks it is important to look for better strategies and policies in the current situation.
The writer is a 3rd year student, the Department of Marketing, Jagannath University