As well as being a human tragedy, the COVID-19 pandemic has been an unprecedented economic shock for the world economy. Global output is estimated by the IMF to have fallen by 3.5 per cent in 2020, and all countries – big and small, rich and poor – have been hit.
There is now an increasingly clear route to bring the immediate crisis to an end by relying on a mass vaccination programme unprecedented in speed and scale. But implementation remains complex and risky, while the long-term consequences of the pandemic – impacts on health, acquisition of skills, and the accelerated spread of technology – remain highly uncertain.… Seguir leyendo »
Lockdowns are being eased in many countries, but from different starting points in terms of prevalence of the virus, and with different near-term trade-offs between protecting life and easing constraints on economic activity.
The pressure to ease is understandable. The IMF estimates $10tn has been spent so far on official support measures worldwide, and forecasts global GDP will contract by an unprecedented 4.9% in 2020.
However, the WHO director general, Dr Tedros Adhanom Ghebreyesus, recently insisted that there is an ‘urgent responsibility to do everything we can with the tools we have now to suppress transmission and save lives’, even as research into vaccines and therapeutics continues.… Seguir leyendo »
Many countries are beginning to ease the lockdowns and re-open their economies. But, even if this process succeeds globally, most countries are facing a sharp increase in their current fiscal deficits and public debt. The IMF estimates advanced country fiscal deficits will average 11% of GDP in 2020, while debt to GDP ratios will rise from an average of 105% in 2019 to 122% in 2020.
In the aftermath of the 2008 global financial crisis, many governments focused on what maximum debt to GDP ratio would be ‘safe’ to protect them from loss of confidence in financial markets – although different considerations applied in the US as the dollar is the global reserve currency.… Seguir leyendo »
With the IMF forecasting a 6.1% fall in advanced economy GDP in 2020 and world trade expected to contract by 11%, there is intense focus on the question of how and when to re-open economies currently in lockdown.
But no ‘opening up’ plan has a chance of succeeding unless it commands the confidence of all the main actors in the economy – employees, consumers, firms, investors and local authorities.
Without public confidence, these groups may follow official guidance only sporadically; consumers will preserve cash rather than spend it on goods and services; employees will delay returning to work wherever possible; businesses will face worsening bottlenecks as some parts of the economy open up while key suppliers remain closed; and firms will continue to delay many discretionary investment and hiring decisions.… Seguir leyendo »
An infectious disease outbreak has long been a top national security risk in several countries, but the speed and extent of Covid-19’s spread and the scale of its social and economic impact has come as an enormous and deeply worrying shock.
This pandemic is not just a global medical and economic emergency. It could also prove a decisive make-or-break point for today’s system of global political and economic cooperation.
This system was built up painstakingly after 1945 as a response to the beggar-thy-neighbour economic policies of the 1930s which led to the Second World War. But it has been seriously weakened recently as the US and China have entered a more overt phase of strategic competition, and as they and a number of the other most important global and regional players have pursued their narrowly defined self-interest.… Seguir leyendo »
Epidemics, of the size of Covid-19, have huge economic impacts – not just from the costs of managing the health of people, but stopping them, and keeping the economy working. The 10% fall in global stock markets since it became clear that Covid-19 would not be limited to China has boldly highlighted this.
Suppressing the epidemic, but allowing the economy to still function, requires key decisions, in which central banks and finance ministries play a part.
The role of fiscal and monetary authorities in managing an epidemic economy
The scope to use monetary policy to manage the economic impact of Covid-19 is limited.… Seguir leyendo »