Pandemic Will Unleash Worst Recession since the 1930s?

The IMF Managing Director, Kristalina Georgieva painted a bleak picture a few days ago. Global economic growth will be “sharply negative” in 2020, triggering the worst fallout since the 1930s, Great Depression. A partial recovery is seen in 2021. About 170 countries are projected to experience negative growth in 2021. And the situation could get worse.

Over 100,000 people are dead because of Covid-19 with more than 1.5 million people infected world-wide.

For the U.S., Tiffany Wilding, an economist at Pimco projects U.S. growth to contract 30% in the second quarter and overall growth to be in the negative 5% for 2020. Unemployment may rise as high as 20% and spread across industries.

California-based Pimco is one of world’s largest investment firms with USD1.9 trillion in assets under its management as at Dec 31, 2019.

The hardest hit are poor countries in Asia, Africa and Latin America. Investors have so far removed about USD100 billion in capital from those economies – three times more than the outflow during the same period of the global financial crisis. With commodity prices depressed, emerging economies would need trillions of dollars to fight the pandemic and rescue their economies. More developed and stable economies have enacted some USD8 trillion in fiscal measures to meet the challenge. The IMF stands ready with USD1 trillion in lending capacity.

Oxfam in its report on 9^th April, states that the economic crisis unfolding is deeper than the 2008 global financial crisis. Regardless of the scenario, global poverty will increase for the first time since 1990. Under the most serious scenario – 20% contraction in income – the number of people living in extreme poverty would rise by 434 million people to nearly 1.2 billion worldwide. Extreme poverty is defined as those living on USD1.90 a day or less. Under the same scenario those living below USD5.50 a day (higher poverty line) would rise by 548 million people to nearly 4 billion. That’s more than half of the world’s population.

Oxfam suggested various measures in individual economies to alleviate the situation – cash grants and bailouts; debt cancellation; increased aid; and, IMF support. In total, developing nations will require USD2.5 trillion to mitigate the consequences of the pandemic. Unless measures are implemented soon the crisis will continue and harm all countries – rich and poor. Leadership is required but that is missing especially from the U.S.

Source: Bloomberg Online

As I was writing this piece, the enormity of the problem made me feel rather hopeless. But we are a people of hope, a people of the Resurrection and it is our duty to give hope to others because He is our solid Hope. And on that we stand! God Bless!

Reference:

1.     IMF Chief: Pandemic will unleash worst recession since 1930, Focus Malaysia, 9 April 2020

2.     Pimco: U.S. GDP will contract 30% in 2Q, 5% in 2020, Focus Malaysia, 9 April 2020

3.     Oxfam: Covid-19 Crisis could plunge half a billion people into poverty, Focus Malaysia, 10 April 2020