Myroslav Prodan: “The pandemic has launched three macroeconomic impulses: a global blow to demand, supply and oil war”
Myroslav Prodan, an expert on tax and customs policy, assessed the impact of the coronavirus pandemic on the world economy and the depth of the economic recession predicted by economists around the world. According to him, it is already clear that in the first quarter of the year, the fall in China’s GDP, which was the first to enter the period of economic downturn, was 10-20%. Prodan agrees with macroeconomic strategy experts, including Saxo Bank expert Kay Van Petersen, that the world is in for a paradox when China’s economic growth is likely to accelerate in the second quarter, while in the rest of the world it will slow.
“China’s services sector is gradually recovering in the second quarter: restaurant chains are opening, some provinces are reporting a return to normal life,” said Miroslav Prodan, noting that much of China’s economic growth will benefit from high levels of mutual trade. between China and the countries of the region.
However, with regard to Europe and the United States, a number of other consequences are becoming more apparent with the spread of the pandemic. According to some analysts, the damage from the coronavirus pandemic has now exceeded the damage from the global financial crisis of 2008 and the terrorist attacks of September 11, 2001.
“The COVID-19 outbreak triggered three macroeconomic impulses: a global blow to demand, a global blow to supply and an oil war that brought market prices to multi-month lows,” said Miroslav Prodan, quoting OECD Secretary-General Jose Angel Gurria. that such events will lead to large-scale depreciation of capital and subsequently to structural unemployment. However, no one knows how much money will be needed to fight unemployment, because it is unknown how many people will lose their jobs. It is also unknown how much money is needed to resuscitate hundreds of thousands of medium and small businesses that have already suffered.
“Under such conditions, a coordinated economic policy of individual states and economic unions and international organizations will be important to overcome the economic consequences of the pandemic,” said tax and customs policy expert Myroslav Prodan. “In particular, back in April, the IMF was ready to provide $ 1 trillion. credit assistance to Member States of the Fund. In addition, the IMF Executive Board has agreed to expand access to emergency funds by about $ 100 billion. Other tools are also being developed, including debt relief for low-income countries. The EBRD, in turn, announced an additional support program of 1 billion euros for its customers.
It is worth noting that the state spends significant funds to support small and medium-sized businesses and households.
“As a rule, all economic aid measures are combined into several aid packages. The most common are fiscal, tax and monetary, as well as regulatory measures. Almost all countries have formed their own social safety net (additional payments and compensations to workers and the socially disadvantaged). In particular, in Italy, Great Britain and Germany, from 1.5% to 2% of GDP is spent for these purposes, the largest expenditures in Hong Kong are about 4%. In the US, the amount of aid for households is 2 trillion. USD, and the total amount of aid has already exceeded the mark of 5% of GDP, “said Myroslav Prodan.
According to analysts, the Spanish flu epidemic in the 18-20s of the twentieth century cost the world economy 6% of global GDP, and the cost of World War II is estimated at 8-9% of global GDP. Now it is very difficult to estimate the cost of the new world crisis. In April, expert estimates ranged from 7% to 12% of global GDP.