Fragile hope

Wednesday, 2020-08-05 17:36:16
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A closed sign is seen in a shop window in Dunham Massey, following the outbreak of the coronavirus disease, Dunham Massey, Britain, May 7, 2020. (Photo: Reuters)
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NDO – The economies of many countries around the world are experiencing recession due to the severe impacts of the COVID-19 pandemic. Second and third epidemic waves have broken out in many countries with the risk of the creaton of an unprecedented crisis.

Data on the second quarter GDP growth this year of 13 of the 36 members of the Organisation for Economic Cooperation and Development (OECD), as well as six other major economies including China, Russia, India, Indonesia, Brazil and South Africa paints a gloomy picture of the global economy.

When the 14 large economies named in the OECD statistics are included, the average GDP of this group in the last quarter decreased by 9.5%. The GDP of the US in the second quarter dropped by 9.5% compared to the first quarter. Germany, France and Spain recorded their rate of GDP dropping by double digits, 10.1%, 13.8% and 18.5%, respectively. Meanwhile, the world's number one power has been downgraded to "negative" by credit rating agency Fitch. Accordingly, the US economy will decline by 5.6% this year. The growth cycle which lasted for 11 consecutive years has officially ended as the US economy declined by 5% in the first quarter of the year and officially fell into recession.

In Europe, the Eurozone economic output has also been strongly affected by the pandemic crisis, the region's GDP in the second quarter of 2020 decreased by 12.1%, the sharpest decline since 1995.

In Asia, many experts forecast that economic growth in Japan in the second quarter will decrease by more than 20% compared to the first quarter. For the first time since 2014, the Thai economy decreased by 1.8%. in the first quarter compared to the same period in 2019 and down 2.2% from the previous quarter.

According to a survey on Asian economies by the Japanese Center for Economic Research (JCER), the five largest economies in Southeast Asia, including Indonesia, Malaysia, the Philippines, Singapore and Thailand, will sink into recession, with a forecast of growth in the second quarter of -7.8%.

It is predicted that the US economy will recover by 4% in 2021 thanks to its large-scale financial adaptation policy. Analysts also predict that Japan's GDP will recover, but there are still many risks. The German economy is expected to gradually revitalise in the second half of this year, provided the of newly-confirmed COVID-19 cases does not increase again.

France has also taken unprecedented measures to support businesses throughout the pandemic, helping people afford to spend even though millions of jobs have beenlost. Spain announced it was requesting EUR209 billion from the European economic recovery fund. The Government of Italy has approved additional spending of EUR25 billion to support employment and income for people, however this plan is quite risky because it will increase the country’s budget deficit to 11.9% of its GDP, the highest level in the Eurozone, leading to a public debt figure of 157.6% of GDP.

In the context of the complicated developments of the COVID-19 epidemic, economic experts have forecast that global growth in 2020 will decrease by 4%, or about US$3.4 trillion. Although countries and regions have launched economic stimulus packages, the economic outlook is still gloomy and it will take a long time to regain growth momentum as before.