Health Crisis Could Cascade to Financial Crisis for Struggling Countries, Warns Singapore’s Trade Minister

Economic News: Coronavirus pandemic could cascade from a health catastrophe to a financial crisis, especially for countries struggling to cope.

On Tuesday, Singapore’s trade minister warned that many countries faced fiscal challenges, and only a few of them had the headroom to change the monetary policy since rates were currently low.

“The situation is dangerous,” Chan Chun Sing, – Singapore’s minister for trade and industry told CNBC.

Chan warned that if we were not careful, some countries would get into a financial crisis beyond the health crisis, and beyond the economic crisis.

According to Chan, an unhealthy fiscal balance, means you need to borrow. If you can’t borrow, then you need to print money. If you print money, then you’re going to debase your currency, and that will seriously destabilize the entire global financial system.

Banks and other major institutions have cut their forecasts for the global economy because of the pandemic.

In a March report, the Organization for Economic Co-operation and Development (OECD)downgraded its growth forecasts for almost all economies in 2020. It said in its March report.

S&P Global Ratings has predicted global growth to push towards zero.

Chan also said, unlike Singapore, many countries do not have financial means to inject liquidity into their system.

Singapore announced three stimulus packages since the start of the outbreak worth 59.9 billion Singapore dollars ($41.9 billion). It accounts for around 12% of the country’s GDP.

Chan called on global major economic powers to step up their leadership and provide stability in these trying times, and for the global economy.

Singapore was among the earliest countries outside China to report COVID-19 cases.

Protectionism might inadvertently ‘break’ global supply chains

As the coronavirus pandemic worsens globally, some countries have become more protectionist.

Chan warned that protectionism countries pose a risk to global supply chains.

Fears of food protectionism have risen in recent weeks. Some countries have stopped exporting supplies to ensure they have enough reserves for their people.

For example, Russia has stopped processed grain exports while Vietnam has reduced rice exports.

Some governments are also hoarding supplies.

Professor Chan told the CNBC that globalization, as we have known it in the past, is over with coronavirus pandemic.

He stressed that the global production system was closely intertwined with interdependence between countries. Therefore, the more countries take on more protectionist measures, the more we might inadvertently break the global supply chain.