Coronavirus recovery: China a rare bright spot amid pandemic gloom

Name: Six months after WHO declared Covid-19 a public health emergency, what more do we know now?
Uploaded: 2020-08-10T01:45:09.000Z
Duration: 7 min 54 s
Description: Six months after WHO declared Covid-19 a public health emergency, what more do we know now?

Current forecasts show contraction on an unprecedented scale, more serious than the 2008 crash and raising chilling thoughts about the 1930s Great Depression

Combine bankruptcies with a fall in company profits and government tax revenues are set to fall sharply just as government spending needs are set to spike

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Employees work on a production line inside a Dongfeng Honda factory in Wuhan, Hubei province, on April 8. China’s swift return to positive economic growth is a rare bright spot amid a landscape of doom and gloom as the pandemic continues. Photo: Reuters

David Dodwell

Published: 9:45am, 10 Aug 2020Updated: 9:58am, 10 Aug 2020

As I stare out my window across Clear Water Bay, at the hundreds out sailing, kayaking, paddleboarding or simply splashing around, my wish is that we can enjoy the pandemic lockdown while we can. The winter ahead for the global economy seems set to be bad – far worse than forecasters have warned so far.

At present, we have forecasts from bodies such as the World Bank, the International Monetary Fund and the Organisation for Economic Cooperation and Development that were released in June and based on data from the first quarter of 2020. These were grim enough. The World Bank predicted a 5.2 per cent contraction in GDP for the full year, which if you take global GDP at the end of 2019 at US$87.8 trillion means a loss of US$4.6 trillion. The IMF’s World Economic Outlook predicts a 4.9 per cent contraction, which would still be a US$4.3 trillion fall.

This is contraction on an unprecedented scale, more serious than the 2008 crash and raising chilling thoughts about the 1930s Great Depression. We are moving into uncharted territory.

These sobering forecasts – and most other private sector estimates – assume the second quarter of 2020 will mark the low point. They say a “V-shaped” recovery will bring improved numbers for the second half of the year as the pandemic subsides and lockdowns are put behind us.

Guess what? Here we are, halfway through the third quarter, and there is no “V” in sight. Most economies are beginning to sense lockdowns are going to stay well into 2021. Last month, IMF deputy managing director Tao Zhang reported that “almost all our member countries are seeing their growth forecasts this year revised downward”.

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Six months after WHO declared Covid-19 a public health emergency, what more do we know now?

While most hard data still lags, common sense and a multitude of anecdotes point the global economy in a worsening direction. The World Bank was most perceptive in its June Global Economic Prospects report when it warned of falling investment, a crash in global trade, huge rises in unemployment, lost schooling, mounting bankruptcies and severe but uncountable costs in the largely informal economies of most developing economies.