The most authoritative projections of the economic impact of the Covid-19 virus are provided by the International Monetary Fund (IMF); they have the best data, the largest team of skilled and experienced economists and financial specialists, and the most comprehensive forecasting methodology. They update their forecasts continuously. At the end of January the IMF projected a pickup in the global growth rate, from 2.9 percent in 2019 to 3.3 percent in 2020. However, the economies of both the US and China were expected to slow down, to 2 percent for the US and 6 percent for China. Just three weeks later the Managing Director of the IMF shared an updated projection for China, with a growth rate of 5.6 percent. The implications of the Covid-19 are unfolding at such speed that the growth rate was trimmed by 0.4 of a percentage point in that short interval.
Many critical characteristics of the disease are not yet known: when will it peak and how? Will other countries be as effective as China in containing the disease? What factors affect mortality and morbidity? Will countries cooperate effectively under the aegis of the World Health Organisation and other networks of international cooperation? These are among the many factors which will determine the global economic impact, and they will become clearer only with the passage of time.
The immediate impact of the virus on Barbados and the Caribbean comes from the fear and anxiety which it has caused. Tourism is the biggest source of foreign exchange and growth for much of the Caribbean, and apprehension about COVID-19 has already begun to affect tourist travel. If the spread of the virus can be contained, losses may be temporary. However, in the event of widespread recession in economies worldwide, the Caribbean will not escape major losses.
The Covid-19 virus is a challenge to all of humanity; it is not only a Chinese problem. Moreover, the effectiveness with which the Chinese economy recovers from the impact of the virus will benefit all of humanity. Chinese production is already more important to global output than US production: China is the world's largest trading nation, and its trading dominance is probably undervalued, because of the difficulty of pricing components that are produced in China for products made in the US and elsewhere. There is no way to disengage Chinese production from global supply chains. Companies hopefully will not try to do so; if they do, their products will become more costly and fewer consumers will be able to afford them.
Globalisation is already a reality, and China is the country that is most deeply embedded in global networks of trade. China has made the greatest contribution to the wellbeing of all mankind, not just the Chinese, in the 21st century, by making goods and services more affordable. A reduction in Chinese production or a reduction in Chinese trading and financial links with the world, will make all of humanity worse off. The overall supply of goods and services will fall, and prices everywhere will rise. The virus reinforces the lesson of the US-China trade war: anything that interferes with the movement of goods, services and finance, especially when it involves the world’s largest economy and the world’s largest trading nation, will make both producers and consumers worse off, all around the world.
All countries need to cooperate through international organisations, including the World Health Organisation (WHO), the International Monetary Fund (IMF), the World Trade Organisation (WTO) and World Bank, to ensure cooperative policies and equitable rules of engagement, for transactions across the globe. Markets work well only when there are regulations that are applied even handedly to all participants. The virus is a further reminder of the need to support and adequately finance all the global institutions of governance, because they are the only legitimate sources of impartial judgement and equal treatment of all peoples.
The Government of the People’s Republic of China has gone well beyond its international responsibility, and it has set a demanding global standard for all nations to adopt. It has shown full cooperation and information sharing with WHO and an international network of scientific research, from the earliest days of the crisis. It has taken swift, comprehensive and decisive action to contain the virus so it could be thoroughly studied before it had a chance to proliferate widely. China has fulsome public information and data sharing programmes, available worldwide. The China Global Television network proves comprehensive coverage of COVID-19, including informed analysis by global specialists, coverage of daily reports by Chinese authorities, the WHO and frontline researchers across the world, and on-the-spot reports from Wuhan and elsewhere in China, as well as Italy, Japan, South Korea, Australia, the US and elsewhere.
Dr DeLisle Worrell, former Governor of the Central Bank of Barbados, is President of the Association for Barbados-China Friendship (ABCF). His website is DeLisleWorrell.com.