The coronavirus pandemic will hit the global economy in a much bigger way than previously expected, warned the Asian Development Bank (ADB) has warned in its annual economic report –  Asian Development Outlook (ADO) 2020.

According to the gloomiest scenario presented by the bank, the impact of the “worst pandemic in a century” will be $4.1 trillion, or 4.8 percent of global gross domestic product (GDP). However, even this forecast could turn out worse given the impact of the outbreak on global supply chains and how long it will take to contain the virus.

“The estimated impact could be an underestimate, as additional channels such as supply disruptions, interrupted remittances, possible social and financial crises, and long-term effects on health care and education are excluded from the analysis,” reads the ADO 2020.

The report said: While the higher forecast reflects the spread of the infection to Europe, the U.S., and other major economies, on the low end, the global cost could be $2 trillion if demand shocks are smaller and containment periods shorten.

Even the best-case scenario indicates a sharp rise in estimated economic fallout from the coronavirus crisis.

An earlier report released by the ADB, an Asian multinational lender, on March 6 showed that the virus could cost the world around $347 billion in the worst-case scenario.

According to the latest outlook, regional economic growth in developing Asia will decline sharply this year amid the Covid-19 outbreak.

The report forecasts regional growth of 2.2 percent in 2020, down more than three percent from earlier predictions.

However, growth is expected to rebound to more than six percent in 2021, if the world returns to normal.

The pandemic-induced global downturn worse than financial crisis, finds IMF

The pandemic has brought the global economy to a standstill and plunged the world into a recession that will be “way worse” than the global financial crisis a decade ago, the head of the International Monetary Fund (IMF) said on Friday, calling it “humanity’s darkest hour.”

The IMF’s managing director, Kristalina Georgieva, speaking at a rare joint news conference with the leader of the World Health Organization (WHO), called on advanced economies to step up their efforts to help emerging markets and developing countries survive the economic and health impact of the pandemic.

“This is a crisis like no other,” she told some 400 reporters on a video conference call. “We have witnessed the world economy coming to a standstill. We are now in recession. It is way worse than the global financial crisis” of 2008-2009.

Georgieva said the IMF was working with the World Bank and WHO to advance their call for China and other official bilateral creditors to suspend debt collections from the poorest countries for at least a year until the pandemic subsides.

China is engaged constructively

She said China had engaged “constructively” on the issue, and the IMF would work on a specific proposal in coming weeks with the Paris Club of creditor nations, the Group of 20 major economies and the World Bank for review at the annual Spring Meetings, which will be held online in about two weeks.

Emerging markets and developing economies have been hard hit by the crisis, Georgieva said, noting that nearly $90 billion in investments had already flowed out of emerging markets, far more than during the financial crisis. Some countries are also suffering from sharp drops in commodity prices.

More than 90 countries, nearly half the IMF’s 189 members, have asked for emergency funding from the IMF to respond to the pandemic, she said.

The IMF and WHO have called for emergency aid to be used mainly to strengthen health systems, pay doctors and nurses, and buy protective gear.

Georgieva said the IMF stood ready to use as much of its “war chest” of $1 trillion in financing capability as needed.

The IMF has begun disbursing funds to requesting countries, including Rwanda, with requests from two additional African nations to be reviewed on Friday, she said.

“This is, in my lifetime, humanity’s darkest hour – a big threat to the whole world – and it requires from us to stand tall, be united, and protect the most vulnerable of our fellow citizens,” she said.

She said central banks and finance ministers had already taken unprecedented steps to mitigate the effects of the pandemic and stabilize markets, but more work was needed to keep liquidity flowing, especially to emerging markets.

To that end, the IMF’s board in coming days would review a proposal to create a new short-term liquidity line to help provide funds to countries facing problems. Georgieva also urged central banks and particularly the U.S. Federal Reserve to continue offering swap lines to emerging economies.

World Bank president

World Bank president David Malpass echoed her outlook in a post on LinkedIn, writing, “Beyond the health impacts from the COVID-19 pandemic, we are expecting a major global recession.”

In his posting, Malpass said a debt standstill could begin on May 1, providing added liquidity for the poorest countries as they battle the disease. During the suspension period, he said, the World Bank and the IMF could evaluate the sustainability of those countries’ debt and the possible need for a debt reduction by official creditors and commercial creditors.

In March, the IMF chief it’s “clear” that the global economy has “entered recession” due to the pandemic.

Georgieva said she expects the recession to be “quite deep.” Recovery is projected for 2021, but only if the virus can be contained, she said.

She said countries needed to step up their response measures aggressively, adding that the IMF has received a large number of requests for emergency financing.

Georgieva said the international body has received pledges from Britain, Japan, and China for a “catastrophic containment and relief trust” for the poorest countries and that she hopes more will follow.

She predicted that emerging markets will need assistance of $2.5 trillion, and that estimate is “on the low end.” A practical approach will be needed to prevent indebted countries from “falling off the cliff,” she said.

U.S. needs cushion

Speaking about the U.S. in particular, Georgieva said it will be absolutely necessary to cushion the world’s biggest economy and said the $2 trillion package of measures already agreed on by the Trump administration was a welcome step.

She said it is important to protect workers and families from sudden loss of income, and that it is also critical to protect companies.

The IMF boss confirmed the IMF is working closely with the WHO to raise global production of critical medical equipment. She said China is an important source of health supplies and is stepping up production.

She predicted that the global recovery will be staggered, much like the way the pandemic hit countries one after the other.

The pandemic could trigger global food shortage, UN warns

As the coronavirus crisis escalated, some countries decided to enforce protectionist measures, including export bans for certain products, to satisfy growing domestic demand.

“The worst that can happen is that governments restrict the flow of food,” Maximo Torero, chief economist of the UN Food and Agriculture Organization, told the Guardian, adding that we may face the consequences of these steps soon.

For example, Russia halted exports of buckwheat and other grains for 10 days starting from March 20. Neighboring Kazakhstan followed suit and introduced restrictions on shipments of wheat flour, buckwheat, sugar, several types of vegetables, and sunflower oil.

The UN official warns that protectionist measures and trade barriers only make the situation worse, creating “extreme volatility.”

Another problem is that some countries now lack the workforce to harvest the crops due in part to border closures and domestic lockdowns. As the coronavirus sweeps through Europe, farmers in France, Spain, and Italy complain that fruits and vegetables are quickly ripening and will be left to rot if the situation does not change, according to Bloomberg. Strawberry and asparagus growers are already unable to pick their crops, while everything from salad greens and tomatoes, to onions and peas could be next in line.

“Coronavirus is affecting the labor force and the logistical problems are becoming very important,” Torero said as cited by the Guardian. He added that special policies should be introduced to keep the food supply chain operating.

In order to not waste tons of harvest, Germany, which lacks around 300,000 workers, has created a special website to bring together struggling farmers and those who can help. Students and those forced to quit their jobs, for example in the service sector, are welcome to join the initiative. A similar platform was reportedly launched in Austria.

Average citizens themselves are contributing to the looming shortages by hoarding food in amounts they cannot even eat before it expires. Panic buying only deepens the crisis, the UN Food and Agriculture Organization said, advising people to avoid wasting food.

Competition for supplies sharpening as pandemic worsens

An AP report said on April 4, 2020:

Scarce supplies of medical equipment are leading to growing competition within the U.S. and among nations, in what one French politician called a “worldwide treasure hunt.”

The governor of New York state, the epicenter of the U.S. outbreak, vowed to seize unused ventilators from private hospitals and companies, while the U.S President Donald Trump said he was preventing the export of N95 respirator masks and surgical gloves, a move he said was necessary to ensure that medical supplies are available in the U.S.

A more immediate concern was the shortage of masks and gloves, leading to fierce competition among buyers from Europe, the U.S. and elsewhere and aggressive measures such as New York state Gov. Andrew Cuomo’s plan to take ventilators that are not being used. Cuomo says New York, the worst U.S. hot spot, could run out of ventilators next week.

“If they want to sue me for borrowing their excess ventilators to save lives, let them sue me,” Cuomo said. He promised to eventually return the equipment or compensate the owners.

Worldwide shortages have caused health care workers to fall sick and forced doctors in Europe to make life-or-death decisions about which patients get a breathing machine. The search for supplies and bidding wars among buyers have created what Valerie Pecresse, president of France’s battered Île-de-France region, called a “worldwide treasure hunt.”

The governor of the U.S. state of Louisiana said New Orleans could exhaust its supply by Tuesday.

Amid swelling cases, Our Lady of the Lake Regional Medical Center in Baton Rouge, Louisiana, has gone from one unit dedicated to coronavirus patients to seven. Nurse Christen Hyde said nurses call families twice a day to give updates on their relatives, in some cases delivering bleak news.

“To have to call a family member and tell them that their family member is not doing well and they are probably going to be passing soon is just devastating,” said Hyde, who has had four patients die.


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One Comment

  1. Avatar peter moritz says:

    Is the “lockdown” actually justified or just a panic induced measure without actual benefit? Some real experts that have a factually based different opinion – because the opinions by other contrarian experts supporting the lockdown are definitely NOT based on facts..because the facts are not even established yet.

    To establish harsh measures and making decision based on less than complete knowledge that drive the economy into a tank, likely bankrupting a lot of small enterprises and affecting negatively the health much more than the virus could by causing long term unemployment – That is really a stupid action by our collected political “leaders”.

    Again, the question one can, has to ask: who really spreads “fake news” and acts on those? The alternate press or the government associated mainstream?

    Dr Gupta is a Professor of Theoretical Epidemiology at the University of Oxford with an interest in infectious disease agents that are responsible for malaria, HIV, influenza and bacterial meningitis.

    Dr Karin Mölling is a German virologist whose research focused on retroviruses, particularly human immunodeficiency virus (HIV).

    Dr Anders Tegnell is a Swedish physician and civil servant who has been State Epidemiologist of the Public Health Agency of Sweden since 2013.

    Dr Pablo Goldschmidt is an Argentine-French virologist specializing in tropical diseases, and Professor of Molecular Pharmacology at the Université Pierre et Marie Curie in Paris.

    Dr Tom Jefferson is a British epidemiologist, based in Rome. He works for the Cochrane Collaboration, where he is an author and editor of the Cochrane Collaboration’s acute respiratory infections group

    German Network for Evidence-Based Medicine is an association of German scientists, researchers and medical professionals…..and so on, and so on for quite a few more.

    Just a sample:

    Dr Richard Schabas is the former Chief Medical Officer of Ontario, Medical Officer of Hastings and Prince Edward Public Health and Chief of Staff at York Central Hospital.:

    “I am not preaching complacency. This disease is not going away any time soon; we should expect more cases and more local outbreaks. And COVID-19 still has the potential to become a major global health problem, with an overall burden comparable to that of influenza. We need to be vigilant in our surveillance.

    But we also need to be sensible. Quarantine belongs back in the Middle Ages. Save your masks for robbing banks. Stay calm and carry on. Let’s not make our attempted cures worse than the disease.”

    https://off-guardian.org/…/12-experts-questioning-the-coro…/

    https://off-guardian.org/…/10-more-experts-criticising-the…/

    To add – one of the “known” unknowns is if this virus actually can produce immunity. If not, we quarantine and protect ourselves during the first wave, only to get hit in a possible and probable second wave, like the common cold.

    Does this them mean we have to have a continuous self quarantine?

    I am in the higher risk group at 70, and can comfortably adhere to self quarantine drawing a Government pension.

    Maybe the solution is to self quarantine the elderly, which eliminates a large pool from the severe cases needing hospitalization,

    ” However, after further adjusting for demography and under-ascertainment, we obtained a best estimate of the case fatality ratio in China of 1·38% (1·23–1·53), with substantially higher ratios in older age groups (0·32% [0·27–0·38] in those aged <60 years vs 6·4% [5·7–7·2] in those aged ≥60 years), up to 13·4% (11·2–15·9) in those aged 80 years or older. "

    https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(20)30243-7/fulltext

    The problem is the ascertainment rate, as nobody knows how many actually carry the disease without symptoms. Some estimates go as low as .5%, which would mean that actually 20 000 UK cases would represent a total of 4 million infected residents.

    https://www.medrxiv.org/content/10.1101/2020.03.24.20042218v1.full.pdf+html

    This is among the known unknowns to really get a grip on how virulent this disease actually is, and why our response just might be completely disproportional.

    If we take the figure of 20 000 diagnosed cases only 1/5th actually show severe symptoms (4000 persons).

    A fatality rate of .32% below 60 means only 13 persons below the age of 60 actually die out of a total infected population of 4 million and 19.8% = 792 are over 60 ….where is the problem here that cannot be solved with self quarantine of the elderly?

    The case fatality rate drops from an estimated 3 – 5% to a low of 815/4,000,000×100 = 0,02% = 1/10 of the rate of the flu virus.

    Even if the ascertainment rate was 10 times higher, that would only mean the cfr is at the level of the regular flu.

    I do not say my calculations are right, because as the officials making the decisions I rely on uncertain facts and incomplete data.

    That should make clear that seriously the economy threatening decisions are made without sufficient knowledge of what the facts really are.