Global banking and financial crisis during covid.

Byline: Nazir Ahmed Shaikh

The global economy is emerging from one of its deepest slumps and beginning a passive recovery after the distressing health and economic crisis caused by COVID-19. Policymakers are facing tough challenges in debt management, budget policies and central banking as they are trying to ensure that this still-fragile global recovery pickups momentum sets a substance for vigorous evolution and development in the coming time. Growth in global Emerging Market and Developing Economics (EMDEs) output is expected to expand 4% in 2021, however, it is still remain more than 5% below of pre-pandemic projection. Global growth is projected to moderate to 3.8 percent in 2022, weighed down by the pandemic's lasting damage to potential growth.

Right now the challenges related to limiting the spread of the virus and development and deployment and administration of vaccines are major priorities. Global community requires to act rapidly and forcefully to make sure the ongoing debt wave does not end with a string of debt crises in EMDEs. As the crisis subsides, policy makers need to balance the risks from large and growing debt loads with those from slowing the economy through premature fiscal tightening. To confront the adverse legacies of the pandemic, it will be critical to foster resilience by safeguarding health and education, prioritizing investments in digital technologies and green infrastructure, improving governance, and enhancing debt transparency.

Although global trade in goods has largely rebounded, trade in services remains feeble. Global financial conditions are being supported by monetary policy accommodation, but financial systems in many countries are showing signs of underlying strain. Whereas most commodity prices, particularly those of metals, rebounded in the second half of the year as demand firmed, the recovery in oil prices has been more modest.

Though all regions are expected to grow this year, the pace of the recovery varies considerably, with greater weakness in countries that have larger outbreaks or greater exposure to global spillovers through tourism and industrial commodity exports. The East Asia and Pacific region is envisioned to show notable strength in 2021 due to a solid rebound in China, whereas activity is projected to be weakest in the Middle East and North Africa and Sub-Saharan Africa regions. Many countries are expected to lose a decade or more of per capita income gains.

Aggressive policy actions by central banks kept the global financial system from falling into crisis last year. Financial conditions are generally loose, as suggested by low borrowing costs, abundant credit issuance, and a recovery in equity market valuations amid positive news about vaccine developments. This masks rising underlying vulnerabilities, however, including rising debt levels and weakening...

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