Coronavirus Pandemic: what next?

Byline: Shabbir Kazmi

The world has changed dramatically during Jan-Mar quarter of 2020. A rare disaster has resulted loss of a large number of human lives. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a 'Great Lockdown'. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.

This is a crisis like no other, and there is substantial uncertainty about its impact on people's lives and livelihoods. A lot depends on the epidemiology of the virus, the effectiveness of containment measures, and adopting corrective measures. Many countries now face multiple crises-a health crisis, a financial crisis, and a collapse in commodity prices. Policymakers are providing unprecedented support to households, firms, and financial markets, but there remains considerable uncertainty about what the economic landscape will look like when countries emerge from this lockdown. It is expected countries will emerge victorious and life will become normal in second half, but the impacts will haunt for considerably long time. It may also be said, "This Great Lockdown has ushered the worst recession since the Great Depression, and far worse than the Global Financial Crisis".

Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, global growth in 2021 may remain dismal. Recovery, even in 2021 may remain partial. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could touch US$ 10 trillion, greater than the economies of Japan and Germany, combined.

This is a truly global crisis as no country is spared. Countries reliant on tourism, travel, hospitality, and entertainment for their growth are experiencing particularly large disruptions. Emerging market and developing economies face additional challenges with unprecedented reversals in capital flows as global risk appetite decreases, and currency pressures, while coping with weaker health systems, and more limited fiscal space to provide support. Moreover, several economies entered this crisis in a vulnerable state with sluggish growth and high debt levels.

For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession. For this...

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