The country lift the quarantine, one after another; the liberated population were scattered in the grass and hair, in a hurry to get back to work and life. But it is unlikely that all will succeed, warn economists and financial authorities, BBC reports.
The output of the largest crisis of the century threatens to be not so rapid and extensive as the entrance, they say, and tipped the world economy heavy rehabilitation, partial paralysis and life-long scars.
Even if the theaters and offices will immediately open up again, business activity, employment, wages and production will not return to those heights from which they overthrew the epidemic Covid-19. There are several reasons.
First, immediately all will not open because the virus is not defeated, there is no vaccine, many countries are waiting for the second wave, and some have not survived the first. This means that people and business are afraid of the future and not in a hurry to spend money unabated, undermining the Foundation of the modern economy — consumption and investment. It in the second.
Third, the quarantine proved to be costly. Unprecedented since the last world war, the paralysis of business, social, cultural and sporting life, along with the collapse of international trade has demanded from countries enormous investments in maintaining the economy on artificial respiration. The money will be repaid, which means that in the future funds for the development and needs of society will be lower, and taxes will rise.
Fourth, the end of the night, Wake up not all. Many businesses — from airlines to restaurants will not survive the quarantine, even with the support of the authorities. Many people will lose their jobs and find another one in new condition will not be easy.
And even if after the recession in the 2020 business activity will revive in 2021, the world economy will not be able to fully win back losses and will miss almost 10 trillion dollars, estimated by the international monetary Fund. And at least another $ 10 trillion the world is going to spend to fight the crisis.
Two dozen trillion — almost a quarter of the entire global economy and about half of budget expenditures of all countries in the world. This alone is enough to throw economists into a despondent: after the disease can quickly restore your health and return to his family and work, but if the bill exceeds half the annual salary, about the imminent return to its former prosperity, however.
Besides, most of the allocated for the restoration of the money came in rich countries, and developing still have to figure out how to Finance the most difficult stage of the crisis is not medical but economic.
It is fraught with the surge of poverty, disunity, nationalism and protectionism, political instability and the decline of trade — that is, threatens to throw the world at the end of the last century and to nullify all the efforts of the past decades in the reduction of inequality and poverty on the planet.
And even Sweden, where the quarantine did not actually have, will be in difficulty. But more on that below.
Each month, a total of quarantine and social distancing reduces the annual increase of wealth of any country is about 2 percent, economists have estimated the OECD.
The head of this club of rich States angel gurría said that the economic recovery in most countries will take more time than it seemed even recently. To return to the previous rate of ascent can take up to two years, he warned at the Financial Times conference in may.
Fear and scars
Most in the developed world will suffer the European Union is the second largest economy in the world after the us. In this meet all economists, however, the assessments differ significantly. If the IMF and the European Commission predict a decline this year by about 7%, the scenario of the European Central Bank allowed a reduction of five and 15%.
How deep will the failure depends on three things, said Vice-President of United Central Bank on 19 countries, to print euros, Luis de Guindos.
First: how fast will lift the quarantine. Second: what part of production and consumption will be lost forever. And third, how successful would anti-recessionary measures of the authorities.
People frightened by the virus and the prospect of a second wave of the pandemic, I’m afraid to spend money if they have left after the first coming Covid-19. But the business does not understand what the demand and postpones investment in the extension. As a result, the economic growth slows as consumption and investment make up the lion’s share of GDP in all developed countries.
Coronavirus awakened in Europeans stinginess, they stopped spending and started to save: some internally, as spend sitting at home, not much to it, and others deliberately, knowing the fragility of existence-for example, nowhere grafted the crisis. The statistics prove it: if the beginning of the century Europeans on average set aside for a rainy day 12-14% of their income in coronavirus year — almost 20%.
Fear of the invisible, deadly foe, more so in the richest country in the world, the USA. America leads in the number of deaths, and let the quarantine there of medium hardness, to get out of it without losses will not work, warn scientists.
“Our economy will lose something valuable. We will be left with scars, and the recovery will be long,” said Nobel laureate Joseph Stiglitz, quoted by Bloomberg.
The scars spoke recently and the head of the U.S. Central Bank’s Jerome Powell. If the decline because of the coronavirus will be delayed, U.S. faces long pause in job creation, capital accumulation and technological development, he warned. The main thing is to prevent the mass destruction of the Americans during the epidemic.
“If not to prevent the bankruptcy of households and business and their consequences years will constrain the growth of the economy. For a long time remained without work, people lose their skills and when their careers come to an end, they go into debt. But thousands of small and medium enterprises and firms — the main motor of employment in the country. Their ruin will destroy the business life of many families and communities and limit the intensity of the recovery,” said Powell.
The reduction of consumption and investment in the crisis has to do with deflation that is not overwhelming and only enhances the pain of the economy. Prices are not rising, no inflation, and consequently, consumers more than ever are seeking to save, not spend, because they see that in the future will buy everything they need, cheaper. The vicious circle of threat also by the fact that in the absence of inflation the debts are not impaired, and for their suppression is necessary to further raise taxes and to cut government spending — and thereby further suppressing consumption and economic activity.
Another problem hindering the recovery — rising cost of business. The company burned on lockdown in other countries, especially in China — the world factory, which produces about 40% of all imported components. Now they seek to move production closer to home, find spare suppliers, create inventories, to accumulate cash. Let more expensive, but more reliable. Suddenly a new epidemic.
And as the depressed consumption rates increase is difficult, the increase in costs eats the profits, investment in development and job creation. This can lead not only to rising unemployment and a slowdown in business activity, but falling prices of shares on the stock market, with the result that the ranks of the crisis-hit join, not only those who live on current income, but also those who have invested in assets, surpluses or savings, including pension.
The Swedish way
The exit from unprecedented crisis the world is groping in a dense fog, as expressed recently by the chief economist of the IMF Gita Gopinath. Only a few years we’ll know whether was the diagnosis and treatment, and will be able to compare the success of different models of pandemic.
All this time will not subside debate about whether it was possible to avoid all this pain and no quarantine? Do not overdo the world, strangled business? Will not the impact of the economic downturn actually murderous virus?
At the dawn of coronaries American scientists analyzed the lessons of the previous global pandemic — the Spanish flu early last century, and came to the conclusion that until a deadly flu was raging, everyone was equally bad, but the production recovery was faster where the authorities quickly and introduced large-scale social distancing and pulled hygiene.
This time a rigid quarantine was chosen by most countries. But the rare Islands of freedom gave confidence to the opponents of this policy. And the first example for them is Sweden.
One of the leading economies of the European Union closed shops and primary schools forbids people to get out of the house. The government restricted the recommendations to the population to keep his distance and work from home, canceled public events and full-time employment in high school and universities.
In the end, the mortality in Sweden was lower than in the most affected large countries of Europe, but significantly higher than in the other Nordic countries. Even in the less restrained and spacious, with Germany, the situation looks much better in Sweden coronavirus to the end of may, has claimed 3,800 lives in a 10 million population, and the Germans died 8,200 people out of a population of 84 million
However, the Swedish economy has suffered not so much as in other European countries. In the first quarter, according to very preliminary estimates, it decreased by 0.3%, while the average in the EU fell by 3.5%, and in frigid rigid quarantine in Italy, France and Spain — and a half times greater.
Certain conclusions can be drawn, however, it is unlikely that the relationship between the rigidity of quarantine and dynamics of the economy straight, said a senior economist at the Swedish Handelsbanken Eric Meyerson. As well as the mortality dynamics, business activity defines a set of structural factors that existed before the pandemic.
They threaten to undo all the achievements of Sweden in minimizing inconvenience to businesses and citizens. About half of the country’s economy is export, and the demand for Volvo and other goods and services in the world has declined sharply.
As a result, the economy will fall in 2020 to the same 7%, predicting that Europe as a whole, said this week the Swedish Finance Minister Magdalena Andersson.
She acknowledged that “a very serious crisis in our economy is growing faster than we expected,” said Bloomberg. A senior economist at the debt Agency Sweden Martin Bjellerup added that Sweden, it is estimated, will suffer a little less than others, but the difference will be negligible.
The Swedes are cautious estimates and are in no hurry to put myself as an example. Prime Minister Stefan löfven gathered last week foreign journalists and disown the image of a moral leader of the fighters with the quarantine. The Swedish model is built on trust between authorities and citizens, who are responsible to do the right thing, he said.
“Write about us, like we’re doing something decidedly different from other countries. It is not, — quotes it Reuters. — Not true, if life in Sweden goes on as usual. It is not so, as always.”
The Swedes are playing with the future in sight and hope that their model of soft quarantine would work better than a series of opening and closings.
“The strategy of Sweden is designed for stability in the long term. When people are first locked, and then released, they are more scared, and uncertainty increases,” — quotes the Financial Times economist at Handelsbanken Christine Nieman, who had been one of the leaders of the Swedish Central Bank.
“It is too early to speculate on whether we will cope better than others. The end result will be more or less the same, in our opinion. Because if not lightened quarantine, everything would be worse because of the global recession, the Swedish economy has traditionally suffers more than others”, she said.