Magazine Extracts – The World Post-COVID-19
9 JUN, 2020
By Constanza Ramos
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The World Post-COVID-19
Will the unprecedented support packages actually succeed in replacing lost incomes and avoiding unnecessary bankruptcies?
The macro-economic outlook still depends upon the future evolution of the pandemic, and upon whether unprecedented support packages will actually succeed in replacing lost incomes and avoiding unnecessary bankruptcies. What we do know is that the downturn is the most severe since the Second World War and that it will leave a lasting mark on us all. The pandemic is an amplifier and an accelerator of pre-existing trends, the most obvious of which is the increase in the already record-high global debt levels. Now is the time for maximizing monetary and fiscal support, there is no alternative. However, managing the debt overhang will define life post-pandemic. It is interesting to note that the Second World War was followed by around 35 years of negative real interes rates. Lean management practices in the health sector and elsewhere need to be reassessed with respect to preparedness. Countries should also strengthen their institutional frameworks so that resources ramp up automatically in times of crisis.
Global Chief Economist at
Indosuez Wealth Management
Whether this will actually happen will be up to our future leaders and the role the United States will play depends critically on the outcome of the November election. Nevertheless, the size of the government in our economies looks set to grow. Moreover, many countries will likely seek greater autonomy in the production of some essential and strategically important goods, given the shortages experienced in the current pandemic. Migration will in all probability meet increased hostility, and this at a time when climate change will almost certainly give rise to record numbers of migrants. 2020 is set to see the first rise in global poverty since 1998....
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The decline of Covid-19 infection rates in most continental European countries allowed governments to start lifting containment measures, the first step towards reopening economies. In Asia, the process of dealing with the epidemic is more advanced and signs of economic stabilization appeared earlier than in the rest of the countries worldwide. While infection clusters have occasionally emerged, the authorities have proactively controlled them. This follows a well-
established process of first bringing down infection rates and then containing any small outbreaks, referred to as a “hammer-and-dance” approach. Singapore’s management of the cluster in migrant workers’ dormitories and South Korea’s response to an outbreak linked to nightclubs fit this framework. On the economic front, hard data in May started to give us a more concrete picture of the ongoing economic damage. By then, the picture was quite ugly with very large GDP contractions and sharply rising unemployment, what was broadly in line with expectations.
Phd, Chief Economist at
Banque Lombard Odier
However, in this context, we believe it is critical to be forward-looking in our assessment given the particular nature of the crisis. In this sense, job losses are driven by a policy decision to shut down activity and limit the spread of the virus; they are not related to economic or financial imbalances that we would see in a typical recession. This is important, because while the contraction is particularly deep, the recovery may also be sharp once these constraints lift. The labour force has not become any less productive in the meantime.
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