The coronavirus-triggered uncertainty is likely to cost the global economy $1 trillion in 2020 with possible ramifications for all countries, the UN’s trade and development agency said Monday in its latest report as stocks plunged in several countries.
“We envisage a slowdown in the global economy to under two per cent for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” Richard Kozul-Wright, Director, Division on Globalization and Development Strategies at UNCTAD, said.
Financial markets have tumbled over concerns about supply-chain interruptions from China, and oil price uncertainty among major producers.
The coronavirus has reached a grim milestone of 100,000 cases worldwide. In the U.S., the cases have risen over 500, sending waves of anxiety among Americans.
But nearly 50,000 coronavirus patients have also recovered, offering a ray of hope that the world could find ways to counter the outbreak and offset its economic repercussions.
President Trump on Tuesday tried to calm fears over coronavirus as the U.S. stocks hit the lowest point since 2008.
As for the economic impact, the UNCTAD says there is also a “doomsday scenario” in which the world economy grows just at 0.5 per cent. Such a dismal performance would involve “a $2 trillion hit” to gross domestic product, according to the official.
The sudden fall in oil prices had been “a contributing factor to that growing sense of unease and panic”.
“There’s a degree of anxiety now that’s well beyond the health scares which are very serious and concerning.”
The trade and development agency head also offered a panacea – spend now, to avoid meltdown later.
In order to counter these fears, “Governments 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”, Kozul-Wright insisted.
On how different countries might react to the crisis including China – where the virus first emerged in December – and the United States, the senior UN economist said that the Chinese Government would likely introduce significant “expansionary measures” – shorthand for increasing spending or tax cuts.
“It will almost certainly do that,” he said. “Will the US Government in an election year, which is where we are…also need to respond in a way other than simply cutting taxes and reducing interest rates? I suspect it will do.”
Turning to Europe and the Eurozone, Kozul-Wright noted that its economy had already been performing “extremely badly towards the end of 2019”.
It was “almost certain to go into recession over the coming months; and the Germany economy is particularly fragile, but the Italian economy and other parts of the European periphery are also facing very serious stresses right now as a consequence of trends over (the last few) days.”
Describing many parts of the Latin American region as similarly vulnerable, he added that Argentina in particular “will be struggling as a consequence of the knock-on effects of this crisis”.
The so-called Least Developed Countries, whose economies are driven by the sale of raw materials, will not be spared either.
“Heavily-indebted developing countries, particularly commodity exporters, face a particular threat”, thanks to weaker export returns linked to a stronger US dollar, Mr. Kozul-Wright maintained. “The likelihood of a stronger dollar as investors seek safe-havens for their money, and the almost certain rise in commodity prices as the global economy slows down, means that commodity exporters are particularly vulnerable.”
“Ultimately,” Mr. Kozul-Wright added, “a series of dedicated policy responses and institutional reforms are needed to prevent a localized health scare in a food market in Central China from turning into a global economic meltdown”.
Although the threat of COVID-19 becoming an official pandemic “has become very real”, the world is “not at the mercy of the virus”, said the World Health Organization (WHO) head, Tedros Adhanom Ghebreyesus, briefing journalists in Geneva on Monday.
He said it was important not to let grim milestones such as passing the infection rate of 100,000 worldwide, sap resolve to contain the disease, stressing that 93 per cent of deaths so far have been in just four countries.
It would be “the first pandemic in history that could be controlled. The bottom line is, we are not at the mercy of the virus”, he added.
SOURCE: UN News Center
