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.
74 journalism professors and journalists signed an open letter addressed to Fox News’ Rupert and Lachlan Murdoch on Thursday, criticizing the network they oversee for its coverage of the coronavirus pandemic.
The letter stated, in part, “The Viewers of Fox News, including the president of the United States, have been regularly subjected to misinformation relayed by the network — false statements downplaying the prevalence of COVID-19 and its harms; misleading recommendations of activities that people should undertake to protect themselves and others, including casual recommendations of untested drugs; false assessments of the value of measures urged upon the public by their elected political leadership and public health authorities.”
It went on to declare Fox News’ coverage a “danger to public health,” citing various statistics. One survey cited, for instance, came from Pew Research and revealed that 79% of Fox News’ viewers felt the media was overstating the potency of COVID-19, or the coronavirus.
A report by Lindsey Ellefson in The Wrap on April 3, 2020 said:
Like other recent critics of the network’s coverage of the pandemic, the professors did point out that some Fox News reporters have done “solid” reporting, specifically singling out primetime host Tucker Carlson.
“Urgently, therefore, in the name of both good journalism and public health, we call upon you to help protect the lives of all Americans — including your elderly viewers — by ensuring that the information you deliver is based on scientific facts,” the letter said.
Primetime host Sean Hannity responded to the letter in an exclusive interview with Newsweek, saying, “They’re guilty of what they accuse me of. I said it in 2007: Journalism is dead.” Hannity then cited misreporting in the 2006 Duke Lacrosse team rape case and Nicholas Sandmann, the Covington High student who sued CNN for defaming him.
Fox News Media has been impacted both by some talent’s early coverage of the virus and by the illness itself: Fox Business Network parted ways with Trish Regan after she questioned whether coronavirus was a hoax designed to hurt President Donald Trump.
Six confirmed cases in the New York offices have coincided with an overhaul of company procedure. All interviews are now down by Skype and the select few employees still working in the building instead of telecommuting are asked to take their temperature every morning.
Earlier this week the network began airing a PSA across the channel where Fox News various on-air talents urge viewers to visit coronavirus.gov for the latest information to stay safe during the pandemic. Fox News and Facebook hosted a town hall Thursday night, making a joint $1 million donation Feeding America’s COVID-19 Response Fund in the process.
Among the signatories are Todd Gitlin of Columbia Journalism School, Mark Feldstein of University of Maryland and Adam Hoschchild of UC Berkeley’s Graduate School of Journalism.
ABSTRACT
The novel corona virus or COVID 19 has finally triggered the collapse of the industrial/capitalist economy. In the first part of this article we outline this collapse and the solution that has been proposed for the last decade and a half by a variety of green initiatives all over the world. However the COVID 19 has also posed an unforeseen challenge. About the best method of facing the challenge of COVID 19 is to maintain social distance in coming 6 months or so. But then how do we implement these ‘solutions’ keeping the social distance that is necessitated by this very COVID 19 that has triggered the present collapse. Can we wait for 6 months for the storm to be over? In Part II we will consider this.
Part I: The Collapse
1) Ever since 2008 financial melt down, the world economy has been on a slow recession. It has been said that it has been the longest drawn recession in the history of capitalism. People expected a repeat of the phenomenon in about 10 years based on earlier cycles in the past 50 years. Through out last year a bigger recession has been setting all over the world. Many have been expecting a ‘Black Swan’ (The black swan events is a metaphor that describes an event that comes as a surprise and has a major effect.) event to trigger this. Only a couple of months ago people were talking of Australian bush fires or locust attack could be such a trigger. As it turned out, COVID 19 proved to be the black swan event.
2) This event is once in a century event and has been compared to Spanish Flu of 1918 when 50 million people died. In India18 million died, so much so that there was no population increase between 1911 and 1921 census. Other such event in India have been Bengal famine of 1943 and partition riots of 1947 where the death toll has been in hundreds of thousands, approaching a million.
3) This time it is different from any of those events mentioned above. We do not know what the number of deaths would be. Probably we would never know in India because of under reporting. However this crisis is an end of era event – end of the era of industrial society/capitalism era.
4) The reason is that, it is bringing a host of other crises together and the whole crisis is bigger than the parts. The parts are: 1. Global Warming 2. Resource depletion 3. Ecological degradation 4. Growing Inequality and Social Unrest.
5) The results of this mega crisis are:
i. Collapse of the present economy
ii. End of globalisation
iii. A big reduction of many sectors of economy e.g. air travels, auto industry, tourism, petro- chemical industry, iron and steel, coal and many many more.
6) The alternative will consist of:
1. Equality 2. Scaling down of the use of resources-particularly energy 3. Local self-sufficient economy 4. Ecological restoration of the present degraded ecology 5. A value system or ethical base which is more cooperative and less competitive than the present society.
7) At a political level it will be federation of states based on ecology. For example present day India can be a federation of 65 states based on ecological regions. The borders – both internal and international borders will be ecological soft borders – a border across which there is no tension.
8) How the local will be organised depends on local ecology. I have elaborate this in the booklet: A call for local action in the wake of global emergency.
9) Essentially there will be about 10 areas around in which the local economy will reorganised. Some existing examples are the transition town movement cities around the world.
10) These 10 areas are: 1. Air 2. Water 3. Waste Management 4. Food Production 5. Energy 6. Health 7. Education 8. Housing 9. Commons and Heritage 10. Employment Generation and Entrepreneurship.
For details see the booklet ‘Kabira khada bazar mein: A call for local action in the wake of local emergency’.
Part II: Rebuilding the economy keeping the social distance
1) On the face of it it seems an insoluble problem. We have the theoretical option of waiting fort six months – let the storm blow over and then we start rebuilding. But we don’t know what happen in these 6 months and whether we can delay it by these 6 months. So we have to start thinking how to start rebuilding the economy through facing COVID 19 – through following the discipline of social distance.
2) One possible answer is to study the rise and decline of this pandemic. We notice that it started in China in may be December 2019 and while it spread quickly all over the world, in China itself it has been brought under control. In many parts of the world its spread is minimal and they may escape relatively unhurt. These parts of the world are ‘undeveloped’ in the modern sense, that is penetration of capitalist society is minimal. So the new initiative should start simultaneously in both the areas: Areas which have recovered and areas which are not likely to be affected seriously.
3) We see at once that there are advantages in both the areas. In the areas where recovery has occurred-they are very developed and with high level of education, health care and environmental consciousness. Some thing like the conditions that were obtained in Cuba in 1991 when they faced this kind of crisis. Can we expect that these areas – China, South Korea, Japan etc. may respond like Cuba did?
4) The backward/undeveloped areas. Many of these areas are tribal/indigenous people’s area. As it is they don’t face any problem on their own. Many of them have healthy traditions of the kind of things that we desire. They don’t need to rebuild so much. The main problem is to remove the capitalist penetration and influences of the market economy – influences of the glitter of urban life – clothes, films, English medium schools, smart phones, motorcycles and so on. It has been a tough problem so far, but with the economic collapse it may become relatively easier to face these problems.
6) In India it started with Kerala on January 30 and Kerala will probably recover first. There has been a talk of Transition Kerala. Such a group should immediately get active through social medial/whatssap etc. Also within Kerala, particularly in Northern Kerala there are indigenous areas and work may start there first.
5) What we do in areas which are in the middle of the pandemic? The first thing to do is to organise relief within the paradigm of social distance. Solutions are emerging daily all over the world. Basically home delivery of food and medicines to all the people and keep the health services going. Meanwhile through electronic/social media local green groups should start planning concrete plans of recovery and rebuilding step by step. Many ngos have good experience in disaster management. Some good initiatives will come from them.
March 21, 2020
P. S. I wrote the above on March 21. Within 7 days the collapse, at least in India is staring at us. (See Jayati Ghosh’s interview by Karan Thapar, The Wire.) Even that is old before the lock down. In the last two days alarming reports are coming. So I decide to circulate widely for what it is worth. Who knows if we will access to internet.
T. Vijayendra (1943- ) was born in Mysore, grew in Indore and went to IIT Kharagpur to get a B. Tech. in Electronics (1966). After a year’s stint at the Saha Institute of Nuclear Physics, Kolkata, he got drawn into the whirlwind times of the late 60s. Since then, he has always been some kind of political-social activist. His brief for himself is the education of Left wing cadres and so he almost exclusively publishes in the Left wing journal Frontier, published from Kolkata. For the last nine years, he has been active in the field of ‘Peak Oil’ and is a founder member of Peak Oil India and Ecologise. Since 2015 he has been involved in Ecologise! Camps and in 2016 he initiated Ecologise Hyderabad. He divides his time between an organic farm at the foothills of Western Ghats, watching birds, writing fiction and Hyderabad. He has published a book dealing with resource depletions, three books of essays, two collections of short stories, a novella and an autobiography. Vijayendra has been a ‘dedicated’ cyclist all his life, meaning, he neither took a driving licence nor did he ever drive a fossil fuel based vehicle.
Email: t.vijayendra@gmail.com
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