COVID-19 and Global Economy

We are already done with the first quarter of 2020 and COVID-19 is still continuing its rampage. The effects of this worldwide health emergency can now easily be seen on the economic aspect as well. A recent announcement from the International Monetary Fund (IMF) has only confirmed the predictions of a global economic crisis of a much larger scale than the 2008-2009 market crash.

IMF and WHO Press Conference

Last Friday, IMF and WHO held a joint conference through video call wherein they shed the light on the economic impact of the pandemic and urged big economies to take steps while also revealing some of the steps they have taken or intend to take. IMF’s Managing Director Kristalina Georgieva said –
“This is a crisis like no other. We have witnessed the world economy coming to a standstill. We are now in recession. It is way worse than the global financial crisis (a decade ago).”

Since most of the countries are in a state of lockdown (partial or complete) for at least the past month, and some even more than that, it has had a huge impact on the market. Apart from the changes the active workforce had to face, hundreds of thousands of workers were laid off across the globe. Financial crunch and Market crash has been a common scene worldwide since the pandemic is not only draining human but economic resources as well.
The impact is especially bad on smaller economies and developing nations, to which end IMF has requested advanced economies to help the emerging ones to survive the present crisis. The IMF, World Bank and WHO are working together to control the damage and have asked official bilateral creditors like China to ‘suspend debt collections from the poorest countries for at least a year until the pandemic subsides’.

They are also working on other proposals incorporating the help of the 20 major world economies, which will be unveiled in the coming weeks. At present, the focus is on the possible debt reduction and it is likely that a debt standstill could begin on May 1 to support weak economies during the pandemic.
The IMF has also begun reviewing requests of the countries and distributing funds and providing emergency aid for the upkeep of healthcare systems. Work is also being done to stabilize markets, especially the emerging ones. Towards the end of the conference, Georgieva said –
“This is, in my lifetime, humanity’s darkest hour- a big threat to the whole world- and it requires from us to stand tall, be united, and protect the most vulnerable of our fellow citizens.”

The IMF and other major global organizations have made their stance and action plan clear but how successful these measures will be, is something only time can tell. Given the increasing impact of COVID-19 on different aspects of society, it’s hard to tell what direction the future will take. We will get through it no doubt, but what about when the dust settles?