An economic crisis unlike others

COVID-19, caused by the deadly Coronavirus, has given rise to global health crisis of an unprecedented order. More than 80 countries in five continents are affected. Nearly three months have gone by since the first case of COVID-19 was detected in Wuhan province of China in December last, but none knows for sure when and how the crisis will end. Though efforts are underway to find an appropriate vaccine, most people, including health experts, are pinning their hope on an eventual end of the crisis through natural process.

But meanwhile, the global economy, it seems, has headed towards a crisis due to the outbreak of COVID-19. The disease first caused disruption to supply chain with China remaining at the centre stage. It then started affecting other areas of the global economy. Air travels were to take the worst hit. The health crisis on a severe scale has also convulsed markets and it is set to impact the US adversely.

The global equity market lost more than $6.0 trillion in just one week, the worst plunge since the 2008 global financial crisis.

Oil prices are down because of the decline in demand due to Coronavirus outbreak. The OPEC and the OPEC-plus members are in negotiations to cut in oil production to help boost the prices of the fossil fuel.

What is more intriguing is that unlike the previous occasions, investors are not showing their appetite for gold this time. They are found more interested in US treasury bills. However, the prospects for US economy right at this moment does not look that bright since a good number of US business giants have substantial exposure to Chinese market, both in the case of getting supplies and marketing goods.

The World Bank (WB) and the International Monetary Fund (IMF) are also concerned. Heads of these two Bretton Woods institutions have issued a joint  statement offering their financial support to countries affected by the ongoing crisis. The WB has also created a $12 billion fund to extend support to poor countries during this trying time.

But, the problem is that the present crisis, the particularly the economic one, is unlike others encountered in the past. No financial misstep is responsible for the ongoing crisis. So, usual crisis-management measures or tools generally used to right the wrong economic measures such as rate cuts by the central banks or bailouts are unlikely to work here. A very tiny organism called Coronavirus has been responsible for the economic crisis and it is immune to financial solutions. So, all will have to wait for the natural end of the disease, at least, temporarily. Measures to contain the virus in the event of its outbreak appear to be the only solution.

Like all other countries, Bangladesh does also stand to suffer, economically, due to the COVID-19 outbreak. Though no case has been detected until now, it is considered one of the high-risk countries. Moreover, in a world marked by a high level of interdependence in the matters of trade and other economic issues, no country can escape any severe impact of a disease like the one now invading countries across the continents. 

The policymakers do need to take stock of the situation and prepare a contingency plan to face the economic challenges that seem to be right at the doorstep.

[email protected]