A chief economics commentator, Martin Wolf, has urged developing countries to use more macroeconomic tools and sustain investments for medium term resolutions to mitigate the impact of COVID-19.
He made these suggestions while speaking at a webinar held by the World Bank on 22nd July, 2020 on the theme ‘What the Future Holds: COVID-19 and the Global Economy’.
The commentator at the Financial Times who also doubles as the Commander of the British Empire (CBE) holds that, many countries have had a hard time in managing the virus but developing countries may have had a more difficult time because they do not have the options developed countries have.
“Well, I think they have an incredibly difficult problem with managing the disease because I don’t think its viable for most countries to close their borders just to manage the disease. They don’t have the resources to support the huge numbers of people in the formal sector without work. They must do what they can. They must support the vulnerable as much as they can but some of the options available in developed countries ain’t really available in developing countries.”
He, however, expressed happiness at how some developing countries are dealing with the novel coronavirus and made some recommendations they could consider in mitigating the impact of the pandemic in the medium term.
Chief Economics Commentator at Financial Times
“They obviously have to put what resources they have in the health systems; they have to be supported. They should use macroeconomic tools if possible. I’m very happy that, they’re using quantitative easing, they’re are allowing exenterates to float. I think it’s very important to sustain investments if they possibly can otherwise future growth will be even more curtailed and of course it’s crucial to find a place getting debt service in the medium term.”
According to the CBE, the world has never experienced a pandemic like this hence, a long-term plan needs to be implemented as this is a different ball game.
“We have to think about not only what we have now but the future. You have to play a longer game not just immediate and that’s really complicated because that’s unpredictable. We’ve never had a pandemic operate on the world economy like this. The last time was about a hundred years ago and we didn’t close down economies. It’s completely new but we have to think about the long game.”
Meanwhile, he suggested a few things the developed countries could consider to sustain their economies during the medium term.
“To focus on the immediate, the core countries – bigger economies – of the world, China and the major developed countries, we have to keep demand going. It’s crucial we sustain demand going, I think that’s largely understood as best we can, given the closures. We have to stabilize financial markets, looking back at the 30s, that was done, that was very very important. We have to keep trade open. This is a bigger worry because if you look back at the 1930’s, protectionism made it much worse. You had the financial crisis and then the protectionism. So that means inward looking, inward protectionism is very very dangerous. And the final lesson pretty obvious learnt from previous crisis is persevering international peace. Afterall, the 1930’s that was the biggest recession before this, it ended the world war.”
Mr. Wolf believes that these are not just any lessons but they are core lessons to be learnt here. He went on to indicate that for emerging markets, “geopolitics is also important here”.
