As the number of coronavirus cases crosses 465,000 with over 21,000 deaths, economists worldwide are talking about a serious downturn with more financial pain in the days ahead. On Thursday, G20 leaders pledged to infuse $5 trillion into the global economy and do whatever it takes to mitigate the economic and social impact of the COVID19 pandemic. The US has come up with a $2.1 trillion emergency aid bill and India too has announced a Rs 5.4 lakh crore stimulus.
To discuss the challenges and steps taken to mitigate the COVID-19 impact, Latha Venkatesh spoke to Kenneth Rogoff, Professor at Harvard University and former chief economist at IMF.
Speaking about an imminent recession Rogoff said, "We are going to have a giant recession this year. The depth of the recession will be lot large at the high end of the 100 worst recessions the whole world has experienced in the last 150 years. The question at this point is not, are we going to have a recession? We are having a very big recession. The question would be how long a recession? I think markets at the moment have built-in a pretty fast recovery, I hope they are right."
The financial dislocations will be serious and the chances of a fast recovery in many parts of the world are fading as the lockdown goes on longer and longer.
"As it proceeds, even with the Federal Reserve doing heroic things, even with the government coming up with a stimulus package twice as big as one might have previously hoped and European countries taking giant steps, this is a huge shock, it is akin to an alien invasion. The financial strains are simply going to be great," Rogoff noted.
According to the former IMF chief economist, the pandemic is a human tragedy but in the economic sphere, governments need to mitigate the damage in the short run to try to have a faster recovery in the long run.
"My co-author on 'This Time Is Different' Carmen Reinhart and I have called for extending the debt moratorium not just within countries as the United States has done to a limited extent, India is now doing it, I think we need to do something also for international loans to some of the neediest developing economies," Rogoff said.