Nepal | May 30, 2020

Coronavirus: Crisis creator in global economy

Dr Badri Pokhrel
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KATHMANDU: The whole world is in the midst of the coronavirus (COVID-19) pandemic, which has infected more than a million people and killed more than 53,000 as of Friday. With billions of people across the world staying in isolation in their homes, their normal life has been affected both physically and psychologically.

As Nepal is in its second week of lockdown, so far six confirmed cases of COVID-19 infection have been recorded. The lockdown has brought the whole country to a standstill, with only a few essential services like water, electricity, health and telecommunication still in operation. All commercial, financial and industrial activities have been closed temporarily. Banks are only partially open, and international flights are barred. This explains just how the virus has trapped the entire economy.

In order to combat this virus, the government has formed a High-level Corona Prevention Committee and Crisis Management Centre. Hospitals and essential service providers have been put on high alert. The government has announced concessions on tax payment, and discount on telephone, energy and internet bills. Likewise, relaxation on taxes and interest payments have been proposed to the private sector and individuals. The government has requested companies to provide salaries and wages to the labourers from their fund while calling on the landlords to waive a month’s house rent. Similarly, the government has banned the import of luxury goods such as vehicles that cost more than US$ 45,000.

Billions of dollars have been spent by countries worldwide for the treatment of COVID-19 and to mitigate its impact on the economy. While the pandemic continues, its economic impact has been more severe than during the 2008 global financial crisis. This has led the Asian, European and US stock markets to collapse. In fact, there is no sector in the world that has not been affected by the coronavirus.

To curb the impact of the novel virus, many countries have made efforts to prop up their economy. The US, on March 27, passed a historic $2.2 trillion package to rescue its economy. This came at a time when more than 3.3 million Americans had filed for unemployment benefits, which has now ballooned to 6.6 million in the one week since.

In the United Kingdom, the government has decided to pay up to 80 per cent of the employee wages for the coronavirus patients who are unable to work. The government has come up with a package of more than $379 billion to support local businesses and grant funds to them to save jobs. The stimulus package mainly focuses on the hotel, airlines and retail businesses. Italy, the country with the highest number of deaths in the world, has seen its economy devastated by the virus. It too has come up with a stimulus package to help small businesses and people facing layoffs.

China, from where the coronavirus disease first started, has been facing economic fallout, with factories shut throughout the country. The Communist party of China has come up with various policy measures to support the people and businesses. The People’s Bank of China is cutting lending rates. And local governments have been providing prepaid vouchers to help increase consumer expenditure to help the economy. There are signs of hope that life in Wuhan and the whole of mainland China will bounce back to normal soon.

The Japanese government recently passed two different stimulus packages to help sustain small businesses — a $4.6 billion package in February and $15 billion in March. Bank of Japan recently came up with a program to dole out loans at 0% interest rate to businesses that have been affected by the virus.

The Indian government recently passed a $22.5 billion spending plan to support its people with daily essentials. The plan includes a program to provide free grains to the poor families, health insurance to the health care workers, and cash payments to senior citizens, construction workers, low income widowers and farmers.

In conclusion, nobody knows what lies ahead or how much more damage it will cause to the economies of individual countries. Many packages have been announced in many countries. Whether these packages will really help to boost the economy in times of such a  crisis is a question that yet remains to be answered .

 


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