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The Financial Express

Raging coronavirus: Its impact on global economy  

Abdur Rahman Chowdhury from Falls Church, Virginia, USA   | Published: May 19, 2020 22:24:53 | Updated: May 21, 2020 23:54:32


Raging coronavirus: Its impact on global economy   

Scientists and political leaders have been struggling hard to track the course of coronavirus. They made projection that the virus will lose its steam after taking about 60,000 human lives in the United States. This projection has been proved untenable as the death toll already exceeded 81,000 on May 11 and the infection has reached about 1.3 million people. Hospitals are operating in full capacity and many more people are likely to die in the coming weeks. Globally, more than 4.2 million people have been found infected and 289,000 people have died. Notwithstanding the ceaseless infection and death, people are protesting months-long shutdown. People have the option to stay home and die of starvation or move out and succumb to infection. There is no third option available for a large section of the population.

President Trump preferred to roll back the shutdown and enable people to resume business as usual. But he was overtaken by the situation on the ground. Though the rate of infection and death rate have declined in recent days, the curve hasn't yet flattened. On an average 1,500 people are dying every day in the United States. The situation marked a significant improvement in California in April but last week there has been a surge of infection in the state. Governors are reviewing the situation at micro levels, and the counties showing evidence of low infection and decreasing mortality over a period of two weeks would be allowed to rescind shutdown and reopen businesses. Though some states in the south including Georgia and Florida have decided to roll back the shutdown and reopen businesses, schools and colleges remain closed. Parents and teachers are concerned that reverting to business in grand scale might unleash another wave of virus. Nonetheless, about 23 states have opted to resume business as usual, with little adherence to guidelines approved by the Centre of Disease Control.

In March, the Congress in partnership with the Treasury Department has passed $2.6 trillion to provide emergency assistance to the population having an annual income less than $90,000, assistance to small companies, to cities and states, price support to the agriculture department, support to hospitals for upgradation, provision of unemployment benefits for 3 months, bailout package to the airlines and international development assistance. This huge amount of money is intended to keep the economy floating until the threat of Covid-19 is dissipated and people can return to work.

The sudden disruption in economic activities forced about 40 million people out of work in the USA. Unemployment rate has jumped to 14.7 per cent in April and it might go up to 20 per cent around June. Economists are worried that the recovery would be slow given the fact that the pandemic has remained intractable. They also conclude that the economy will shrink by 4.5 per cent this year. Economic Advisor Kevin Hassett predicts that recovery will not gain momentum until next year. There is a growing consensus that the economy is not going to bounce back quickly even as more outlets reopen this month. The businesses will operate with limited capacities as customers will be fearful to move out. This would imply that the economy would engage fewer workers in the coming months to come.

The situation in other parts of the globe has been tumultuous. China was gradually returning to business as usual. Many commercial firms resumed working since mid-March but slowed down because of declining demands of their products abroad. Despite worldwide suspicion of China's opacity on the origin and secrecy on the early spread of the virus, Beijing embarked on supplying medical kits to affected countries. It claims to have dispatched 4 billion medical kits to the United States in recent weeks. Canada, however, complained that the masks supplied by China fell short of the specification. Some 45 countries in Asia and Africa have received the essential medical supplies from China. While it was making headway in revamping its economy last week, there was a sudden surge of infection in the northern province of Jilin which took Beijing by surprise. The authority responded in full force to contain the pandemic. Countries who were keen to follow Chinese model to contain the pandemic learned that a reduced infection and mortality for a short period cannot be taken as licence to revoke safety protocols and return to work.

France, Germany, Italy and Spain have relaxed restrictions on the movement of the people across their geographical boundaries and allowed opening of shops, restaurants and manufacturing industries. Italy and Spain were the worst affected countries by Covid-19. Italy lost about 30,000 people while nearly 2 million got infected. It has eased restrictions on travel and allowed the markets and shops to resume business. But people are yet to recover from the greatest shock of the century. Restaurants are almost empty, and people are hardly buying. Tourism, the largest revenue earning sector, hasn't recovered and will not be on track until the situation in the entire region makes a significant improvement. Similar is the situation in Spain.

England has been another country severely affected by coronavirus. About 25,000 people died and more than 120,000 have shown symptoms of infection. Its prime minister who just recovered from infection announced gradual easing of restrictions in order to allow people to return to work. But it will take a few more weeks to restore confidence in people and get the economy functioning.

The European Union warned a massive decline to the region's economy due to prolonged shutdowns. Economists predicted that if handling of the crisis remains unimpeded with restrictions rescinded and societies do not resort to lockdown again, the economy is expected to shrink by 7.4 per cent in 2020, by comparison Europe's economy dropped by 4.4 per cent in 2009, the worst year of financial crisis. Economists believe the gains from slow recovery since 2009 crisis has been decimated by the pandemic. The unemployment level will rise from 6.7 per cent in 2019 to 9 per cent this year. They are, however, optimistic that should the virus be restrained from resurfacing again, the economy might grow by 6.3 per cent in 2021. But the impact will be uneven among the member countries. Countries like Italy, Spain and Greece will experience lower growth because the tourism industry will attract less tourists and shrink by more than 9 per cent. The EU will also confront a challenge from the hardest hit countries demanding transfer of money from less affected countries in support of recovery process.

The infection and mortality rates in south-east Asia have not yet reached an alarming level largely due to preemptive actions taken by the governments. In Bangladesh, the governments closed schools, colleges and the universities in March, shutdown the garments in and around Dhaka and then closed the offices. The movement of the people came under severe restrictions with the suspension of the railways, inter-city bus services and waterways. Major airlines suspended their flights to and from Dhaka and Chittagong. All these measures, though painful, helped to keep the situation under control. The government, however, couldn't avoid bringing its stranded nationals from abroad. But it was unable to keep the arriving passengers in quarantine for the required period. This contributed to the spread of the virus in different parts of the country. 

Bangladesh government has launched stimulus package granting TK.2,500 per family, released food grains at subsidised prices, equipped the hospitals to treat coronavirus patients and mobilised medical personnel to cope with additional pressure. Gonoshastya Kendra has successfully created a testing tool at a reasonable cost capable of testing large number of people daily. The sooner the Health Ministry accords permission, GSK and its partners will be able to carry out mass testing on major cities and habitations. This will go a long way to identify the persons with positive symptoms in their early stage of infection and initiate the treatment at home, clinics or hospitals. The hospitals will not be overwhelmed, and lives will be saved. Testing has become extremely important especially when the garment workers have returned to work and they work in congested environments.

Bangladesh had a bumper rice crop this year and according to the Minister of Agriculture 90 per cent of the crop has been harvested till last week. The winter vegetables have also been harvested and ready for marketing, but transportation is a major constraint for the farmers to sell their products. The government should allow trucks and lorries to operate in the highways enabling the agricultural produce to reach the urban markets where these are now needed most.

Though garment factories have resumed, the sector awaits an uncertain future. The European buyers are not ready to receive new shipments. In fact, a number of foreign buyers had cancelled their "purchase orders" in March due to the pandemic. No new orders can be expected until the threat of virus disappears.

Hundreds of migrant workers have returned from the Middle East in recent weeks. Given the fall of oil prices and suspension of Hajj this year, Saudi Arabia lost billions of dollars. The war in Yemen added salt to injuries. The suspension of flights has brought colossal financial loss to the airlines including the Emirates and the Qatar Airways. The economy in the Gulf States faces severe meltdown.  It will be interesting to see what the programmes are prioritised by the World bank, International Monetary Fund and Asian Development Bank as recovery interventions.

 

Abdur Rahman Chowdhury is a former official of the United Nations.

darahman.chowdhury@hotmail.com

 

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