The money spoiler virus
The coronavirus outbreak is not only proving to be a life threatening eruption across the globe, but it is shattering the world economy as well.
The epidemic could cost the global economy up to USD 2 trillion this year and can even cause a recession in some countries and depress global annual growth to below 2.5 per cent.
The slowdown in the global economy can be as severe as two per cent for this year, and that will probably cost in the order of USD 1 trillion, compared with what people were forecasting back in September.
Apart from the tragic human consequences of the COVID-19 epidemic, the economic uncertainty it has sparked will likely cost the global economy USD 1 trillion in 2020.
A preliminary downside scenario sees a USD 2 trillion shortfall in global income with a USD 220 billion hit to developing countries (excluding China). The most badly affected economies in this scenario will be oil-exporting countries, but also other commodity exporters, which stand to lose more than one percentage point of growth, as well as those with strong trade linkages to the initially shocked economies.
Growth decelerations between 0.7 per cent and 0.9 per cent are likely to occur in countries such as Canada, Mexico and the Central American region, in the Americas; countries deeply inserted in the global value chains of East and South Asia, and countries in the immediacy of the European Union.
Last week, United Nations Conference on Trade and Development (UNCTAD) had said that the trade impact of the coronavirus epidemic for India is estimated to be about USD 348 million and the country figures among the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade.
Slowdown of manufacturing in China due to the coronavirus outbreak is disrupting world trade and could result in a USD 50 billion decrease in exports across global value chains.
While it was difficult to predict how the international financial markets will react to COVID-19’s, but one thing is sure and that it the whole world is anxious about the virus taking a huge toll on the economy.
The coronavirus has moved well beyond the health scares alone as the impact it has left on the global economy is huge and will leave a very serious dent on the growth prospects of every country.
To counter these fears, the Governments across the globe 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.
However, given the present scenario the central banks are not in a position to solve this crisis alone and an appropriate macroeconomic policy response will need aggressive fiscal spending with significant public investment, including into the care economy, and targeted welfare support for adversely affected workers, businesses and communities.
KV Network
