The world economic picture is becoming darker due to the spread of the COVID-19 pandemic. In its latest report, the International Monetary Fund (IMF) stated that global economic growth could drop by 3% this year, leading to the worst financial crisis since the Great Depression in the 1930s. Director-General of the World Trade Organization (WTO) R. Azevedo said that global trade transactions this year could be reduced by 13-32%.
The COVID-19 pandemic has devastated the world's largest economies, causing serious consequences. According to J. William, president and chief executive officer of the Federal Reserve Bank of New York, the US economy needs from one to two years or more to recover. US small businesses may need up to US$500 billion a month to ensure that they can survive the epidemic. In China, according to the National Bureau of Statistics, GDP in the first quarter of 2020 fell 6.8% over the same period last year. According to IMF forecasts, China's economy will grow by only 1.2% in 2020. The European economic picture is also seeing an era of unprecedented darkness as the epidemic was serious in all key economies of the continent. In Germany, Europe’s number one economy, the IMF has predicted the country's growth may shrink 7.5% in 2020, with the private sector heavily affected. The German central bank, Deutsche Bundesbank, said the German economy was in severe recession and is unlikely to recover quickly.
In recent days, a series of strong “remedies” have been “pumped” into economies through a number of stimulus packages to lower lending rates and even providing cash to people directly. In the US, the federal government’s Paycheck Protection Program has offered US$350 billion in loans to small businesses. Although the US is now the centre of the disease worldwide, US President D. Trump affirmed that he will reopen the country soon and said that the US will have three stages of economic recovery. In China, Xinhua said, the government will implement measures such as lowering interest rates, reducing compulsory reserves and re-lending to support the economy, especially for small and medium enterprises. In Europe, the EU Commissioner for Economy P. Gentiloni said the Eurogroup has proposed EUR500 billion for healthcare provision, short-term work and to assist small and medium-sized businesses.
However, analysts say that the above-mentioned solutions are not enough to pull the economies out of recession and it is not a comprehensive solution to help the global economy grow again. Director of the IMF in the Asia-Pacific region said Asian countries need to take advantage of all policy tools to cope with the current situation with a focus on preventing the bankruptcy of small businesses as well as high unemployment rates. Providing cash directly to people, as part of a US bailout, may not be the optimal policy for many Asian countries. Emerging economies also need to seek financial support from multilateral institutions, as well as use controlling measures to cope with disrupted capital flows due to the pandemic.
One of the issues that analysts and governments are most concerned about at the moment is how the world economy will recover after the pandemic. Will the “growth scenario” be a quick rise or prolonged stagnation? This question currently has no answer, because the growth prospect depends on the course of the disease. If the world can quickly push back the pandemic or find a vaccine to treat COVID-19, then economic growth will soon return; otherwise, the “deep coma” of many economies could last. Currently, some economies have begun to loosen social distancing and reopen, but the world will face a new blockade period if the disease is not strictly controlled. According to the Organisation for Economic Cooperation and Development (OECD, GDP growth of OECD countries will decline by 2% for every month their economy is closed.
The only measure to help the global economy recover is for countries to stay united to fight the COVID-19 pandemic and work together for economic recovery. Where humankind can’t win the fight against the disease, they will likely “lose” on the front of economic recovery and no country can win if it “walks alone” in these battles.
