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The spread of the COVID-19 epidemic is a public health emergency, but also a major economic threat that will depress annual growth this year to below 2.5 percent, a top UN development strategist said Monday.
Richard Kozul-Wright, director of Globalization and Development Strategies for the United Nations Conference on Trade and Development (UNCTAD), said at a UN press conference that central banks cannot solve this crisis alone.
"An appropriate macroeconomic policy response will need aggressive fiscal spending with significant public investment, including into the care economy, and targeted welfare support for adversely affected workers, businesses and communities," said Kozul-Wright.
"The so-called 'COVID-19' shock will cause a recession in some countries and depress global annual growth this year to below 2.5 percent, the recessionary threshold for the world economy," said the UN economist.
He told journalists the downside scenario could see a 2 trillion-U.S. dollar shortfall in global income with a 220 billion-dollar hit to developing countries.
He warned it could be worse, noting that losses of consumer and investor confidence are the most immediate signs of spreading contagion, an analysis by UNCTAD suggested.
There had, however, been a combination of asset price deflation, weaker aggregate demand, heightened debt distress, and a worsening income distribution could trigger a more vicious downward spiral.
He said widespread insolvency and possibly another sudden, big collapse of asset values, which would mark the end of the growth phase of the current cycle, could not be ruled out.
He said, however, "We don't see a repeat of the 2008 and 2009 banking crisis. The world's banking system is now in a slightly more robust situation that it was then."
(ASIA PACIFIC DAILY)
