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The Pandemic Economy

Dickson C. Igwe Photo: Provided
By Dickson C. Igwe

COVID-19 will determine the length of recession, the trajectory of recession, and the type of economic recovery the world experiences, not any type of stimulus.

Stimulus in the midst of a global pandemic is a band-aid. Stimulus will generate economic recovery only after the departure of the virus from the globe.

OK. The COVID-19 virus is present in most of the world’s countries. The best any government can do to mitigate the spread of the deadly pandemic is to adopt public health measures and restrict the movement of people both internally and externally. People in motion are the key carriers and transmitters of COVID 19.

However, the result of government action to save lives is drastically reduced economic activity. When people are required to stay indoors, socially distance, and wear protective masks, the result is reduced consumer demand leading to economic contraction. That is what is happening in the Virgin Islands and worldwide today.

There are two phases of a pandemic economy. The first phase is what happens before the pandemic ends, probably through a vaccine or discovered cure, or a dying off of the virus after it has infected a specific number of the world population and global immunity is achieved.

The second phase is the Post COVID economy: how the world economies recover after the virus disappears. The preceding is a long way off. It is a mere hypothesis.

The path the virus takes, and how it impacts countries and populations, is uncertain.

The one certainty is that stimulus or government borrowing required for keeping workers and businesses afloat, itself will create long term economic impacts, such as much larger global and national debt.

Stimulus borrowing will lead to decades of much higher national debt repayments, and possible austerity and deflation in countries that do not possess the financial power of being able to borrow from investors cheaply. Economic depression is a global threat as countries face massive economic uncertainty.

To add to these economic woes, public health expenditures will increase dramatically to fight the impact of the virus on the public. This will add further to government debt, and increasingly restrict public investment in alternative economic sectors by governments.

Countries that are monocultures, that rely on one or two sources of income, especially countries such as those in the Caribbean that depend on tourism and hospitality to drive economic and job growth, will have it especially difficult during this time of pandemic.

Health experts expect this pandemic to go on for at least two years. The ending of 2022 is when this crisis is expected to end. There are some who state that the COVID 19 Pandemic could go on for even longer.

Consequently, adapting to living with the pandemic will become the way ahead.

Travel restrictions are here to stay. Bilateral travel will become the norm with countries establishing travel bubbles: travel agreements between countries with low or zero cases of COVID 19.

Delusion is never a good thing. Delusion is self-deception. The UK and US leaders have attempted to gloss over the seriousness of the present crisis. The result has been surging in the numbers of infections and deaths from the virus in their countries.

The COVID 19 Virus, until a cure is found, will decide the fate of the world economy.

The best policymakers can hope for is to restrain the worst effects of the virus through wise policy choices, and driving the highest standards of public hygiene.

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3 Responses to “The Pandemic Economy”

  • pat (04/07/2020, 10:59) Like (0) Dislike (1) Reply
    Yes economy is dead
  • E. Leonard (04/07/2020, 15:11) Like (3) Dislike (0) Reply
    Until a vaccine is developed and the globe is vaccinated (advanced countries must contribute to residents of poorer countries getting vaccinated), Covid-19 will run things, determining the trajectory of economies. There is an inverse relationship between Covid-19 and health and robustness of economies. The decision makers in locales, especially in small locales as the VI, must strike a delicate balance between public health and safety and the economy. IMO, yes, people have to live and eat yet public safety and health must come first. The economy will bounce back but a life lost is gone forever. Some people believe that the economy should come before health and life. For example, Texas LT Governor Dan Patrick suggested that a)senior citizens might be willing to die of the Coronavirus to save the economy and)there are more important things than living. Moreover, some locales reopened to quickly and prematurely, eg, the US states of Florida, Texas, Arizona.......etc and the opportunist virus has sttiked and spiked with a vengeance, causing states to retrench their reopening. plans. Today, Florida have had approx 11,000 new cases.

    Moreover, indeed, in a pandemic, stimulus spending is a band-aid. Nonetheless, as Barbadian PM Mia Mottley noted in an interview with CNN International Anchor Christiane Amanpour that despite the virus Caribbean people have to live and eat. Covid-19 has caused a rise in either unemployment or a reduction in work hours so people need help to bridge that gap between Covid-19 and re-employment. Consequently, a Keynesian- style stimulus package will help to bridge the gap. Further, to increase borrowing to address the impact of Covid-19 will crowd out other investment opportunities but doing so is a necessary evil. In these dog days of Covid-19, the VI must reimagined life post Covid-19. Be safe and stay safe.
  • willie (17/07/2020, 04:46) Like (0) Dislike (0) Reply
    However, the result of government action to save lives is drastically reduced economic activity. resume examples


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