There’s No Savior for the Global Economy This Time Around
During the 2008 financial crisis, two countries, China and India came to the rescue of the global economy. But this time around, both have been hit by the coronavirus pandemic as hard as other economies.
The months’ long lockdown in India has left the country staring down at its fifth recession. While China had already overstretched its capacity pre-coronavirus on credit binging to evade the looming financial crisis.
The coronavirus depression has severally been confirmed to be far much worse than the Great Depression. It is going to affect the whole world since no economy will be left strong enough to rescue the rest of the world.
According to an opinion column by Linette Lopez, author at Business Insider Africa, the US has so far handled the pandemic poorly. Washington, therefore, needs to pass another coronavirus bill as soon as possible to rescue the mass number of people affected as a result of the lockdown.
Coronavirus Has Left No Country Untouched
The financial crisis of 2008 wreaked havoc in the US and Europe with much cleaning needed on their banking systems. The global economy was affected but it didn’t deteriorate as other countries kept it afloat with monetary policies.
In China, policymakers induced a massive stimulus to completely skip the recession, leading to 9.4% GDP growth in 2009. In India, the crisis was hardly noticeable with a GDP growth of 7.9%.
The two countries have been recognized as the ones that lifted the global economy while the US was in recession, according to researchers at the Institute of International Finance (IIF).
They helped the global economy fall by only 0.4%. Without their help this year, the fall will be as high as 3.8%. Even with the little 2020 growth expected from China.
However, this time the whole world felt the influence by this pandemic. Therefore, there’s no stimulus waiting to be spent that is not being spent right now in fiscal measures.
“But this time, no corner of the globe remained untouched by the pandemic or its effects. And so there’s no country that can reasonably chug along and keep things from getting truly disastrous.”
The US Is the Last Resort
China spent 500 billion to avoid a financial crisis. Consequently, it built an expansive shadow banking system and has been trying to keep inflation under control since 2015. However, the resulting total debt In China’s corporate household, and government sectors has gone up by 303% of its gross domestic product (GDP).
Meanwhile, China’s central bank, the People’s Bank of China has exclusively stated that there is no immediate need to keep adding emergency stimulus to the economy.
Asia also depends on much trade from South America. Trade has gone down due to border restrictions and reduced domestic demand from Asian countries.
Despite the worrying economic news surrounding the dollar, the high unemployment rate, and congress fights about stimulus packages, the author maintains that the US will have to step up eventually.
“Democrats and Republicans are arguing over whether or not the country needs another rescue package. It does. In fact, the whole world needs it.”
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