A United Nations report on trade has said that the world economy will go into recession this year due to the coronavirus pandemic, with a predicted loss of trillions of dollars of global income. This will spell great trouble for developing countries, with the possible exception of India and China.
The United Nations has called for a $2.5 trillion (Rs 188.22 lakh crore) bailout package for developing countries, where two-thirds of the world’s population lives, the United Nations Conference on Trade and Development said on Monday. UNCTAD said this package will “turn expressions of international solidarity into meaningful global action”.
“The economic fallout from the shock is ongoing and increasingly difficult to predict, but there are clear indications that things will get much worse for developing economies before they get better,” UNCTAD Secretary General Mukhisa Kituyi said.
UNCTAD said that in the two months since the coronavirus spread beyond China, developing countries have taken an “enormous hit” in terms of capital outflows, growing bond spreads, currency depreciations and lost export earnings. It said that commodity prices have fallen and tourist revenues have declined, and the impact of the 2020 economic crisis will be worse than that of the 2009 crisis.
UNCTAD said that commodity-rich exporting countries will face a $2 trillion to $3 trillion drop in foreign investments in the next two years. The report added that in recent days, advanced economies and China have put together massive government packages which, according to the Group of 20, will pump $5 trillion (Rs 376.44 lakh crore) into their economies.
“This represents an unprecedented response to an unprecedented crisis, which will attenuate the extent of the shock physically, economically and psychologically,” the UN body said. These package will inject a demand of $1 trillion (Rs 75.37 lakh crore) to $2 trillion (Rs 150.74 lakh crore) into the global economy, and a 2% rise in global production. Even so, the world economy will descend into recession, the report said.
However, the report did not say exactly why India and China will be exceptions to the global recession and loss in income that will impact other developing countries. “The economic fallout from the shock is ongoing and increasingly difficult to predict, but there are clear indications that things will get much worse for developing economies before they get better,” Kituyi said.
The Covid-19 pandemic has so far thrown up over 7,86,000 cases, and killed more than 37,800 people as of Tuesday morning, according to an estimate by Johns Hopkins University.