Meltdown starker than 'great depression' looms

Warning of a looming world meltdown harsher and starker than the Great Depression, eminent economists and think-tanks on Tuesday called for urgent and unprecedented policy responses from governments and global institutions to combat and offset the impact of coronavirus-driven steep decline in economic activity and financial-asset price.

International Monetary Fund chief Kristalina Georgieva already confirmed that the global economy is now in a negative growth trajectory that appears to be "far worse than the recession of 2008," while S&P Global Ratings predicted a global growth of 0.4 per cent this year, noting "there has been a significant blow to near-term growth prospects and roiled financial markets due to the economic effects of social-distancing measures to contain the virus, alongside falling consumer and business confidence."

The IMF chief said the length and depth of this global recession depend on two things: Containing the virus and having an effective, coordinated response to the crisis. "We should not go ... with small measures now when we know that it is a gigantic crisis. We've never seen the world economy standing still. Now we do. How we go about revitalizing it is another important topic."

Just a few days ago, the IMF pledged $1 trillion in loans, while the World Bank and the International Finance Corporation (IFC) has pitched in $14 billion to help nations facing the pandemic assault.

On Tuesday, the United Nations said six billion people living in developing economies hit by the pandemic will urgently need a $2.5 trillion rescue package to boost their resilience to further hardship. Richard Kozul-Wright, a top official of the UN trade and development body Unctad said the commodity-rich exporting countries would face a $2 trillion to $3 trillion drop in investment from overseas in the next two years.

Economist Nouriel Roubini, who is nicknamed "Dr. Doom" for his accurate predictions on the Global Financial Crisis, forecast a starker scenario of a global economy devastated by the pandemic and warned that a failure to rein it in risks a worse downturn than the Great Depression.

"The best economic outcome that anyone can hope for is a recession deeper than that following the 2008 financial crisis." He argued the pandemic's fallout in three weeks has surpassed the economic toll of the financial crisis and the Great Depression over three years. "Not even during the Great Depression and World War II did the bulk of economic activity literally shut down, as it has in China, the United States, and Europe today. The best-case scenario is a return to growth in the fourth quarter of this year," Roubini said.

Victoria Kwakwa, vice president for East Asia and the Pacific at the World Bank, said the pandemic is expected to sharply slow growth in developing economies in East Asia and the Pacific as well as China. "The region faced an unusual combination of "disruptive and mutually reinforcing events. Significant economic pain seems unavoidable in all countries," said Kwakwa.