Covid-19: ‘Challenge to all humanity’

Covid-19, the novel strain of coronavirus, is not just a Chinese problem, but a global one, given the fact that China “is the country most deeply embedded in global trade networks, said former Governor of the Central Bank of Barbados, Dr Delisle Worrell.

And he warned that a reduction in Chinese production or its trading and financial links with the world, would make all of humanity worse off.”

In a paper entitled The Economic Impact of Covid-19, the economist noted that at the end of January the International Monetary Fund (IMF) projected an increase in the global growth rate, from 2.9 per cent in 2019 to 3.3 per cent in 2020, but China and the United States, the two biggest economies, were expected to slow down, to 2 per cent and 6 per cent respectively.

In looking at the numbers again, three weeks after those initial figures, he said: “The Managing Director of the IMF shared an updated projection for China with a growth rate of 5.6 per cent, an indicator that the implications of Covid-19 are unfolding at such speed that the growth rate was trimmed by 0.4 of a percentage point in that short interval.”

Dr Worrell noted that there were still many unknown aspects of the disease, such as the morbidity and mortality rate, when it was expected to peak and how, and whether other countries will be able to contain it as China has, and “these factors will determine the global economic impact and will become clearer only with the passage of time”.

On the Caribbean, he noted that since tourism is the biggest source of growth and foreign exchange for most of the countries in the region, and apprehension about the disease has already begun to affect tourist travel, “if the spread of the virus can be contained, losses may be temporary, but in the event of a widespread recession in economies worldwide, the Caribbean will not escape major losses”.

In underscoring the importance of China to international trade, Dr Worrell noted: “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 produced in China for products made in the United States and elsewhere.

“There is no way to disengage Chinese production from global supply chains; hopefully companies will not try to do so, because if they do, their products will become more costly and fewer consumers will be able to afford them.”

He continued: “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.”

Dr Worrell also stated that “all countries” need to cooperate through international organisations, as the World Health Organisation, the International Monetary Fund, the World Trade Organisation and the World Bank to ensure cooperative policies and equitable rules of engagement for transactions across the globe.

“Markets only work well 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.” Dr Worrell.