Abacus | Coronavirus: why Asia will win the race to economic recovery
- The Covid-19 pandemic has exposed structural weaknesses in the way we go about things, meaning new economic strategies are needed
- Countries that can emerge from the crisis to a new normal and with the least amount of new government debt are the likely winners
Economists have been discussing, or guessing, what the global recovery will look like. In economist speak, the recovery from a recession is described in terms of shapes. Optimists see a “V”-shaped snapback from the Covid-19 disruption. In this scenario, we will very quickly return to where we were six months ago. However, the number of optimists is dwindling fast, as the crisis is turning out to be more drawn-out than they originally expected.
Less optimistic economists have been warning of a bumpy road ahead, perhaps including a second dip in equity prices, before a recovery begins. That recovery may look more like a “U” or a “W”. Plenty of examples of such recessions can be found in the 1970s and 80s. Pessimists see a long, slow, hard slog back to normal – an “L” shape, or a depression similar to that of the 1930s.
‘HELICOPTER MONEY’
To avoid the unthinkable and protect all of us from a repeat of the 1930s, governments and central banks worldwide have stepped in to support their economies with the old strategy of flooding the economy with money and dropping wads of free cash into ordinary folks’ laps – like the HK$10,000 cash handout from Hong Kong’s fiscal reserves this year.