The Covid-19 pandemic broke out at a time when there were heightened uncertainties in the global economy. The broad-based growth slowdown in the world economy over the past year has been accompanied by a sharp slowdown in international trade flows and global manufacturing activity. Amid rising tariffs and rapid shifts in trade policies, business confidence has deteriorated, dampening investment growth across most regions.
Softening demand has also weighed on global commodity prices, in particular crude oil and industrial metals. While the global shift towards more accommodative monetary policies has eased short-term financial market pressures somewhat, long-term fault lines create significant uncertainty. The Covid-19 was primarily a health crisis but also dealt a heavy blow to market confidence and economic activity causing development and financing crisis.
Covid-19 has exposed and exacerbated inequalities between countries just as it has within countries. The least developed economies have poorer health conditions, health systems that are less prepared to deal with the pandemic and people living in conditions that make them more vulnerable to contagion, and they simply do not have the resources that advanced economies have to respond to the economic aftermath. The pandemic won't be controlled until it is controlled everywhere, and the economic downturn won't be tamed until there is a robust global recovery.
The pandemic significantly affected almost all economies in the world the impacts will vary across countries, depending on the extent of the health crisis and policy measures put in place. The global economy could suffer between $5.8 trillion and $8.8 trillion in losses-equivalent to 6.4% to 9.7% of global gross domestic product (GDP)-as a result of the novel coronavirus disease (Covid-19) pandemic, says a new report released by the Asian Development Bank (ADB).
It has caused huge job losses for migrant workers as migrant workers are particularly likely to work in accommodation and food services, one of the most affected sectors in the Covid-19 crisis. Worldwide FDI flow is expected to drop by about 35 percent due to travel bans, disruption of international trade, and wealth effects of declines in the stock prices of multinational companies.
Globalization and opening up of economies and integration to each other is believed to be instrumental to the development of poorest economies and has created an opportunity for emerging and developing countries to grow their economy with linkage to other economies and world become more inter-dependent through financial linkages and webs of supply chains of MNCs, but also deregulation, privatization, liberalization and financialization benefited only a small fraction of the population at the expense of falling or stagnant productivity and wages.
As a result, of unavoidable integration.The evil side of globalization has widened the inequality and economic insecurity increased, exacerbated by declines in public provisioning of basic services, undermining public health and social protection systems. The weakness of globalization surfaced during this ongoing Covid-19 epidemic situation.
Bangladesh's economy is making a comeback from the Covid-19 induced downturn. In July, the government claimed that the country achieved a remarkable 5.4% GDP growth in FY 2019-20 and that consequently, per capita income has risen by $155 to US$2,064. The growth rate is significantly higher than the forecasts of the World Bank (WB, 1.6%), International Monetary Fund (IMF, at 3.8%), the Asian Development Bank (ADB, at 4.5%), and the Centre for Policy Dialogue (CPD, at 2..5%). Leading economists consider these figures 'misleading' and 'do not hold water.'
The export was slowing down, private investment and credit were declining. Economists pointed to several indicators - for example, FDI, registration of investment projects, import of capital machinery, and domestic resource mobilization - and blasted the government for providing an unrealistic picture of the economy. In this situation, the Covid-19 worsened the situation. The recent growth in export, higher remittance from expatriates and coming back of small businesses at their profession indicate that Bangladesh's economy is moving in a positive direction to recover as early as possible.
The production of agriculture performing well although marketing and distribution have sufferer due to restrictions on transportation for a few months. In June 2020, the IMF forecast that coronavirus-related shutdowns would shrink global gross domestic product by 4.9 percent, marking the sharpest contraction since the Great Depression of the 1930s, and called for more policy support from governments and central banks.
On the other hand, all the recent forecasts of the IMF other global financial institutions are continuing to project a "partial and uneven" recovery in 2021. The global economy is in "less dire" shape than it was in June but risks crashing again, if governments end fiscal and monetary support too soon, fail to control the coronavirus and ignore emerging market debt problems. The Managing Director Kristalina Georgieva said that "My key message is this: The global economy is coming back from the depths of this crisis."
While the full impact cannot be known for some time as many countries are still struggling to contain the virus spread, the pandemic-related economic and human costs will undoubtedly have long-term repercussions through the tragic loss of lives and livelihoods. Emerging markets and low-income countries face a precarious situation with weak health systems, high external debt and dependency on sectors most exposed to the pandemic such as tourism and commodities. "
In low-income countries, the shocks are so profound that we face the risk of a 'lost generation'," Georgieva said, signaling that the IMF and World Bank will press hard for more debt relief for low-income countries next week.Despite all positive expectations, the global economic situation remains highly fluid due to the uncertainty about the length and depth of the pandemic-induced economic recession.
There are also uncertainties concerning the effectiveness and sustainability of government policies to cushion the shock. This fluidity is reflected in the growth forecasts by major international organizations. For example, the Organisation for Economic Cooperation and Development (OECD) lowered its forecast of global economic growth for 2020 in June to -6.0 percent or -7.6 percent, depending on a single or double wave of infections. The World Bank also lowered its forecast of global growth to -5.2 percent.
It is interesting to see that developed countries such as the USA are doing it with their resources or printing money when their currencies can be accepted in all circumstances. But the problem is to make sure that developing countries will have the resources, or will be provided with the resources, to be able to have similar packages to rescue their economies.
Policies to rebuild both in the short and long-term entail strengthening health services and putting in place targeted stimulus measures to help reignite growth, including support for the private sector and getting money directly to people. During the mitigation period, countries should focus on sustaining economic activity with support for households, firms and essential services.
Global coordination and cooperation-of the measures needed to slow the spread of the pandemic, and of the economic actions needed to alleviate the economic damage, including international support-provide the greatest chance of achieving public health goals and enabling a robust global recovery. These may be managed by instituting a new "global social contract."
Supported by strong public policies at all levels, especially at the national level, these factors could bring about the salvation of the global economy as it recovers or re-emerges from the pandemic crisis. The global supply chain be re-establish or re-organize to bring back the economy to pre-pandemic status.
The writer is a legal economist
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