The global economy is already in recession as a result of the COVID-19 pandemic. The conservative estimate is that the pandemic will cost the global economy at least some US$ 1 trillion dollars this year with the World Economic Forum estimating the world economy to grow by just 0.5 percent this year. The figures however are modest estimates. Experts are still figuring out the full scale of the damage the pandemic is inflicting on economies. Economists are not discounting a bleaker economic scenario.
The pandemic has assaulted national economies on so many fronts. No one is sure when this pandemic will pass, but what’s is certain is that no economies will be left untouched, with some having to bear a heavier economic cost than others. The sharp drop in oil price is definitely a cause for worry. The disruption in the supply chain is another concern given that the Chinese economy is not quite ready to assume its role as it is still coping with the aftershocks of the disease. Commodity-driven economies will also be hard hit given lower demand. For countries that are high in debt, the strong US dollar will make repayment all the more harder. The gig economy is also not doing economies any favour. With more workers on contracts, the prolong lock-downs, will create massive unemployment. This will hurt developing economies the most, especially those with huge informal sector employment.
European economies, particularly Germany will be sorely tested especially after struggling to maintain healthy growth in 2019. In Southeast Asia, Singapore is expected to go into recession with the economy shrinking 2 percent after an earlier forecast of -0.5 percent. Malaysia is also expected to experience a sharp drop, with its economy projected to post between 0.5% at best, and at worst, shrink 2 %. The Asian Development Bank reports that Indonesia will still see positive growth of about 2.5 percent despite the pandemic. Thailand however is seeing its GDP estimates cut from 1.8% to -0.3 percent, with the pandemic hitting hard its hospitality industry. Australia is also expected to break it 28-year of positive growth with experts estimating the economy to contract to about 1.3 percent.
The less than sanguine economic outlook is seeing economies go on an expansionary mode, doling out massive economic stimulus packages to save jobs, keep the economy running and prepare for a recovery. Indeed this is the time to stimulate local businesses and put more more cash to people’s hands. Singapore, in an unprecedented move, has put aside an additional US$41 billion dollars to its existing budget for this year , amounting to about 12 percent of its GDP. The three stimulus packages announced also the saw the government drawing US$4 billion from its reserves. Malaysia also announced three stimulus packages totaling about US$ 60 billion dollars while Indonesia and the Philippines have all announced stimulus packages amounting to US$ 12 billion and US$3.9 billion respectively. Australia is pumping in some US$80 billion to stimulate its economy.
It is left to be seen whether the stimulus package can soften the damage that the pandemic is inflicting on economies. No one knows how long this pandemic will last after all previous predictions were proven wrong. The hope is now for a vaccine to contain the disease. What is also needed is for a more global effort in harnessing resources to help slow down the spread of the disease.
While containing the disease is turning out to be monumental, it is harder to think how the world economy is going to recover from this shock. With major economies still feeling the effects of the 2008 global financial crisis, recovering from this pandemic episode will be tough – though not impossible. There is reason to fear because three of the world’s largest economic blocs, China, US and Europe, are bearing the heaviest brunt of the pandemic.
To recover from this pandemic, national economies need to know that they are in this together. There need to be a global collaborative effort from all stakeholders of the global economy – international organisations, big financial institutions, corporations and national governments – to look beyond individual or national interests and find ways to improve the world’s public good which has been left shattered by this pandemic.
Shared responsibility is what the world needs now because this pandemic goes beyond just resuscitating national economies. It is about containing the many spillover effects from this pandemic. We have not yet figure out the social, political and environmental costs of this pandemic. Such impacts are slow and insidious but no less damaging in the long term. We cannot discount for instance that the Arab Spring and the ensuing political and economic changes in the Middle East had to do with the global financial crisis of 2008, that damaged economies and overthrew regimes. In looking for an economic formula to fight the effects of this pandemic , there is also the need to look beyond economic imperatives.