As Covid-19 surges, get set for world recession
— International Monetary Fund ( IMF) Managing Director Kristalina Georgieva
IF you escape Covid-19 that is spreading across the planet, you will not dodge the next contagion: the 2020 world economic recession.
The IMF expects the massive downturn this year, with global growth turning negative, hammered by the pandemic’s strangling impact on tourism, retailing, manufacturing and other major sectors of national and international commerce and industry.
BRIEfiNG MEDIA AT THE GROUP of 20 meeting of rich nations’ finance ministers and central bankers in Washington, D. C. in the United States this week, IMF Managing Director Kristalina Georgieva warned of a worldwide slump just as bad as or even worse than the crushing 2008 to 2009 GLOBAL fiNANCIAL CRISIS (
Indeed, while Covid-19 cases and deaths worldwide alarmingly mount, another set of global numbers grimly sink: economic growth forecasts for major nations and regions. And this virulent recession is the next crisis for the country and the planet.
Analysts see global growth slipping to 1 to 2 percent this year, well below the 2.5 percent needed to avoid recession. And our National Economic and Development Authority (NEDA), fearing as much as a 0.6- percent contraction in gross domestic product (GDP) this year because of Covid-19, has announced a growth-boosting plan (more on this later).
‘The impact will be severe’
How bad will the recession hit? Shudder at the negative forecasts of leading investment banks for the United States in the coming April to June quarter.
Goldman Sachs predicts that US economic output will shrink by 24 percent in the second quarter from the same period last year, two- and- a- half times the current record of 10 percent quarterly contraction in 1958.
Deutsche Bank sees a 12.9-percent contraction; Bank of America, 12 percent; and Switzerland’s UBS 10 percent. J. P. Morgan expects a 3- percent decline in THE fiRST QUARTER AND 2 PERCENT IN THE SECOND. PACIfiC INVESTMENT Management Co., the world’s largest bond investment firm, urges sweeping growth-boosting measures to keep the predicted US recession from turning into a far more devastating depression.
Europe, too, is set for major contraction, with its largest economies shutting down, starting with Covid-19 epicenter Italy, also gravely infected Spain and Germany, and late lockdown nation Britain.
The Morgan Stanley investment bank sees a 0.9- percent global growth this year, worse than the 2001 slump, but less painful than the 2008 debacle.
Against recession, US President Donald Trump and the US Congress are forging a $2-trillion economic stimulus package, on top of credit-boosting moves by the Federal Reserve, America’s central bank. And he wants to lift America’s lockdown in mid-April.
Can we escape recession?
What can the Philippines do in the face of global recession? NEDA has put forward a three-phase plan:
Phase 1: Clinical/ Medical response, public health response, then short-term augmentation of health systems capacity;
Phase 2: Rebuild consumer and BUSINESS CONfiDENCE; AND
Phase 3: Resume a new normal state of economic activity more prepared for another possible pandemic.
Drawing lessons from the successful effort of Gloria Macapagal Arroyo’s administration to avoid recession during the 2008 to 2009 global slump, this writer and former Cabinet secretary urges a national public- private mechanism to monitor and proactively address economic and business challenges, to keep growth on track.
The Arroyo Cabinet had a similar program, called Global Recession Indicators Monitoring, or GRIM, to promptly spot and act on growth-sapping problems. This time it would be good to involve the private sector more closely and extensively, given the far greater challenge of countering both economic and pandemic threats.
Besides the growth-monitoring and - sustaining mechanism, other initiatives to consider and, if warranted, fast-track include:
– Boosting rural incomes with projects to increase agricultural and fisheries production and marketing, including more farmtomarket roads. This will not only ensure food supplies and costs, but also lift the poor, who are mostly in the countryside
– BEEfiNG UP MEDICAL EDUCAtion and training with scholarships, online instruction development, accelerated courses, and more paramedic training, to rapidly enlarge the corps of anticontagion personnel
– Investing in more hospital beds and intensive care facilities in both government and private hospitals, especially in places woefully lacking in them. This initiative can be supported by the proposed increase in medical training. It may also include the planned overseas Filipino workers’ hospital, now urgently needed
– Investing in and giving incentives for the production and nationwide stockpiles of face masks, gloves and other protective attire; disinfectants and sanitation equipment; and other items needed to make homes, workplaces, public facilities and transport, and people's daily activities safe
– Investing in and giving incentives for new clean water sources and services — the indispensable infrastructure in combating contagion and promoting public health and hygiene
– Adopting financial relief measures to keep businesses and households solvent amid rising CREDIT DIFfiCULTIES, INCLUDING REGUlatory and legislative measures to allow creditor institutions and enterprises offering relief to cash-strapped borrowers
– Undertaking or enabling the rollout of high- capacity and affordable telecommunications facilities, especially for underserved areas and sectors, for greater telecommuting and remote access to government services and essential needs
– Ramping up investment-friendly policies and processes toward greater ease of doing business, plus a review of tax incentive reforms seen as hurting competitiveness.
Despite these and other economic and social initiatives, the nation will likely suffer immensely from both the pandemic and a recession. In this time of widespread distress, Filipinos, especially the wealthy and the well- off, must practice even more the virtues of charity and to share resources and bring relief to the needy.
We are facing the biggest national struggle since World War 2 — against an army of invisible killers. Only by helping one another can we achieve not only recovery, but national solidarity.