The Financial Express

Virus dims growth hopes, globally  

Published: March 13, 2020 22:12:24 | Updated: March 15, 2020 21:43:05

Virus dims growth hopes, globally   

With an already fragile global economy weakened by slowed-down growth traceable to trade war and low productivity in the rich as well as developing economies in 2019, the fear was widespread that the 2020 might witness a recession. But the new year came with the still worse news from China -- it is in the grip of Corona virus.   Now as the dreaded virus is stalking the continent of Europe, the Middle East and the Americas, the global business is bracing itself for the worst. Though it is sheer scare more than the fatalities count that has been forcing many affected economies to go for lockdowns in large swathes of their territories, the already strained global economy has now run into an adversity it is hardly prepared to confront. Add to these the fresh crisis triggered by drastic oil price reduction by Saudi Arabia in reaction to the breakdown of talks with Russia on oil production cut. The Saudi action has hit the already shaky financial market to go into a tailspin.

The economic forecasts portray a further retarded global economic growth in the current year.  The global growth would be slowed down by 0.5 per cent, if the Corona virus could be contained by June 2020. But in case the virus continues to rage through till the yearend, the slowdown rate would be trebled to 1.5 per cent. So, the prospects for the world economy would depend to a large extent on how quickly and efficiently the affected nations are able to bring the scourge under control.

Since this new threat to the global economy is unprecedented, it would be quite a shot in the dark to predict how things may play out for the business world in the long run.  Seeing that their profit earnings are dropping sharply due to a shrunken demand market for consumer products, big corporate businesses worldwide are getting shy of making capital expenditures, that is, of reinvesting their profits as part of business expansion. And such reinvestments being the source of foreign direct investments (FDIs), it is clear that, the investment-hungry developing economies like ours would be at the receiving end.  Going by an estimate of a UN body, the global foreign direct investment (FDI) is to diminish by 5 to 15 per cent. It would impact negatively the economic growth worldwide between 2020 and 21. As it came out from the international body's study, such slowing down of businesses, especially among the global players, would affect more directly their profit earnings rather than the outcomes of production or supply chain disruptions. 

Obviously, the countries invaded by the virus will be the ones worst-hit economically, and those not so harshly affected would somehow survive the direct, though not the indirect, shock. Which is why, the impact of the virus across the global economic landscape is forecasted to be 'uneven.' Bangladesh, though not directly affected so far, still runs the risk of indirect shock due to the production and supply chain disruptions suffered by its big business partners. China is one such case whose virus-inflicted economic downturn is already affecting Bangladeshi projects financed by the country. Other important business partners of Bangladesh like South Korea, Japan and Italy, now grappling with the calamity, would be similarly placed vis-à-vis the projects they fund and operate here. Since the emergency is global, it would be no exception for Bangladesh. While the financial house needs to be kept in proper order containment should be an all-out endeavour.

Share if you like