COVID-19 and World Economic Situation: A Glimpse  

COVID-19 has created havoc in the world as every country has been suffering quantitatively   and qualitatively and economic crisis is shuddering.  Let me first present quantitative data in this context and as per South China Morning Post (14/9/2020), altogether   confirmed COVID-19 cases were 28,999,180 (about 3 Crore). And unfortunately, total deaths across the world were 923,994 and cases of three top countries as per the number of deaths are concerned, were USA 194,081, 131,625 in Brazil and in India 79,722.  While talking about the qualitative data, I am presenting facts and figures from the e-book, “COVID-19 and Global Food Security” published by International Food Policy Research Institute (IFPRI), 2020. As per the publication, “little more than half of the world population is currently under some form of social distancing to contain the health crisis”. Further, as sequel of COVID-19 and social distancing etc., millions of businesses have been closed. The International Labour Organization has predicted around 200 million workers might lost their job because of COVID-19.  In the United States, virtually 22 million people lost their jobs by the first part of April 2020. In view of the grim situation, the Governments in Europe and the United States have promised unprecedented fiscal and monetary incentive measures to reimburse for the income losses of businesses and workers and to contain an unavoidable economic crisis. “But the relief responses of low- and middle-income countries have thus far been more limited”. Further, it is evident from the publication that 140 million people (20 % from the present level) could be in the group of extreme poverty (based on $1.90 poverty line) in 2020 which is very unfortunate.  This in turn would lead to food insecurity, low purchasing power of the people.

It is evident that COVID-19 is leading to global economic recession in 2020. And looking at the Gross Domestic Product (GDP) it is evident that in 2020 across the world many countries will face negative GDP. In one line GDP means, the total value of goods produced and services produced in a country during one year.  For the negative GDP, few data are presented here from IFPRI publication. In the world real GDP might scale down to (−) 5.0 percent and the prediction for the developed countries and developing countries are (−) 6.2 percent and (−) 3.6 respectively. And the real change in the GDP for other regions are, Africa south of Sahara (−) 8.9 percent, South Asia (−) 5.0 percent, Southeast Asia (−) 7.0 percent and Latin America (−) 5.9 percent. So it is evident that worldwide negative growth is observed because of COVID-19.  And if growth is negative then its impact will be awful on ‘Multiplier Effect’. For the benefit of readers I wish to mention that in macroeconomics, Multiplier is a factor that measures how much an endogenous variable changes in response to a change in exogenous variable. One simple example is if more people get employment then their purchasing power will scale up and they will purchase more goods and commodities and thus industry will flourish, economy will develop. On the other hand, high unemployment because of job lost will have bad ‘Multiplier Effect’. Anyway, in case of our country, I wish to mention, from the publication that, the Union Government’s relief package, popularly known as Pradhan Mantri Garib Kalyan Yojana (Prime Minister’s Scheme for the poor), is meant at providing safety nets for those badly hit by the COVID-19 lockdown. “However, it is inadequate in the face of the enormous scale of the problem. Nobel Prize economists Esther Duflo and Abhijit Banerji say that the government should have been much bolder with the package’s social transfer schemes. The $22 billion in spending is only 0.85% of India’s GDP”.

Before conclusion, from the IFRRI Report I am quoting, “While the agriculture and food sectors have been identified as essential in most countries, we also assume some supply disruption caused by reduced labor mobility (for example, for seasonal migrant labor) and further, that perishable farm products suffer greater postharvest losses of 5% due to logistics problems and demand fallout”.

Dr Shankar Chatterjee, Hyderabad