Joint efforts required to ensure “health of global economy” amid COVID-19 outbreaks

Wednesday, 2020-03-25 11:18:19
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According to IMF Managing Director Kristalina Georgieva, the losses to the global economy caused by COVID-19 this year could be even much greater than those in 2009. (Photo: Getty)
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NDO – The world economy is witnessing severe damage caused by the COVID-19 pandemic. Facing the risk of economic recession and projected negative growth, many countries have launched bailout packages as a “life buoy” for the economy.

After the “Great Recession” in 2009, the global economy now confronts a gloomy future as warnings of a new downturn due to the serious impact of COVID-19 are being continuously issued. International Monetary Fund (IMF) Managing Director Kristalina Georgieva said that the losses to the global economy caused by the epidemic this year could be even much greater than those in 2009. In the context of nearly 80 countries in the world asking for IMF emergency aid, this financial institution now stands ready to mobilise its US$1 trillion lending capacity to help countries around the world, while urging them to deliver unprecedented response.

A series of countries have announced huge spending packages to reduce the impact of COVID-19. Secretary-General of the Organisation for Economic Cooperation and Development (OECD) Angel Gurria recently proposed a new Marshall Plan (the European Recovery Program after World War II), as a global recession is forecast to occur in the first six months of 2020 unless the world takes urgent actions. According to experts, only an overall international effort can help the world to cope with the current situation, towards developing a response solution to the “economic shock” and paving the way for recovery.

Relief packages were immediately offered by countries as “painkillers”. The Federal Reserve (FED) announced the beginning of a series of unprecedented credit measures for families, small businesses and large employers who are struggling due to the impact of COVID-19. US President Donald Trump delivered a strong message expressing his impatience when witnessing halted production activities as a result of large-scale isolation measures. The German economy has raised a “red alert” with the risk of suffering potential losses of hundreds of billions of euros, much higher than the damage it has experienced in economic crises or natural disasters over recent decades. In order to stabilise the economy, the German government has approved an emergency bailout package worth EUR750 billion.

As one of the hardest-hit countries of the COVID-19 epidemic, Italy is warned to have entered a period of “wartime economy” after the government passed stringent measures, including the cessation of any non-essential production activities. The Italian government initially approved an edict on spending EUR25 billion to support the economy. Former Bank of England (BOE) Governor Mervyn King also stated that the fifth largest economy of the world is facing a serious challenge as the UK banking system has almost collapsed. To cope with the current situation, the UK government pledged a credit guarantee worth £330 billion (US$381 billion) for businesses and announced unprecedented support measures to ensure employees are still paid, while the BOE launched a £200 billion property purchase programme. Meanwhile, the Swiss government announced a financial package worth US$32.7 billion to support the economy. The Finnish government also approved a support package of EUR15 billion as the economy is projected to decline by between 1.5% and 4% this year.

In Asia, President of the Republic of Korea Moon Jae-in announced a plan to double its emergency financial support package to WON100 trillion (US$80 billion) to support businesses, while launching special funds to stabilise the stock and bond markets. In Australia and Africa, credit packages worth tens of billions of USD are also being proposed.

According to analysts, the world needs to take collective action. The “health of the global economy” can only be guaranteed through joint efforts, alongside the “separate dose” for each economy.