Stimulus packages key to recovery from Covid-19 impact, according to leading macroeconomic influencers
As Covid-19 lockdown measures continue across the world, unemployment rates have spiked, and several businesses have collapsed. Stimulus packages are key to addressing these issues and reviving the economy. Although these packages may increase national debt, they are essential to avoid a protracted recession.
Rory Johnston, Managing Director and Market Economist at Price Street, shared a graph depicting the various rescue packages announced by countries across the world to deal with the impact of the Covid-19 pandemic.
The graph shows that emerging markets are leading in handing out direct cash payments compared to advance economies.
Very handy visualization on COVID rescue packages.
I'd love to see the relative size of each package noted at the right axis (% of GDP of whatever measure you want). https://t.co/9b9McBQyFD
— Rory Johnston (@Rory_Johnston) April 22, 2020
Ernie Tedeschi, former US Treasury economist, tweeted that the Covid-19 outbreak and unemployment rate of more than 20% is a bigger problem than national debt. The tweet was in response to US Senator Mitch McConnell’s comment stating that states should declare bankruptcy rather than seek federal assistance.
Tedeschi added that the government should spend what is needed and reassess fiscal policy when the outbreak is controlled.
The coronavirus itself, and the prospect of 20+% unemployment, is a bigger problem than the national debt right now, by several orders of magnitude.
Let's spend what we need right now and we can reassess fiscal policy when we're recovered. https://t.co/9C3lfsFRM2
— Ernie Tedeschi (@ernietedeschi) April 22, 2020
Pedro da Costa
Pedro da Costa, a reporter, shared an article about the impact of Covid-19 pandemic on low-income communities. He added that low-income jobs in the fields of retail, hospitality and childcare are at risk during lockdowns imposed by governments. Such jobs do not offer paid sick leave or health insurance.
Governments should target their stimulus packages towards these low-income communities and create an adequate standard of living for everyone, the article added.
"Low-income jobs in fields like retail, hospitality, childcare, and the gig economy cannot be performed remotely, and in the US the majority do not offer paid sick leave or health insurance." https://t.co/vSHwTUZd1V
— Pedro da Costa (@pdacosta) April 22, 2020
Ludovic Subran, chief economist at Allianz, shared an article detailing how household saving rates in Europe are expected to increased by an average of 36% in the second quarter of 2020 due to lockdown restrictions. This will equate to €1.3tn in additional savings or 10% of GDP.
Government should develop policies that focus on unlocking these savings by creating a conducive environment for increasing spending, the article adds. Some of the ways in which spending can be increased include supplementing existing unemployment and public guarantee schemes, and access to wealth management facilities.
In Europe, household saving rates could increase by +20pp to 36% on average in Q2 2020. This means EUR1.3tn of additional savings, or 10% of GDP. Total savings could peak at EUR2.3tn. Twice as much as 2009. Tapping into savings will be key for the recovery https://t.co/7QI4L8UB2q
— Ludovic Subran (@Ludovic_Subran) April 22, 2020
Covid-19 lockdown restrictions should be lifted based on the needs of the economy, say leading macroeconomic influencers
The measures being implemented by governments across the world to control the spread of the Covid-19 are having devastating impact on the economies. Governments have tried to introduce unemployment benefits and implement fiscal stimulus measures but they seem ineffective. Assessing the needs of the economy and easing lockdown measures is essential to revive the economy.
Raoul Pal, founder and CEO of Global Macro Investor and Real Vision Group, tweeted that negative bond rates are expected to follow as the US has now witnessed negative crude oil prices.
Pal added that the negative bond rates will become a reality regardless of the steps taken by the Federal Reserve.
So, now we have had negative crude oil, are you so sure that we won't get negative rates in the US? I think the bond market will go negative, regardless of the Fed.
Truly extraordinary times. pic.twitter.com/FGNiuFuFxZ
— Raoul Pal (@RaoulGMI) April 20, 2020
Ferdinando Giugliano, an author, tweeted about the taxes expected to be imposed by governments after the Covid-19 pandemic to spread the cost of the crisis.
Giugliano cautioned that governments should be careful in raising the taxes as the Covid-19 pandemic has impacted both businesses and individuals alike. A simple wealth tax may not be the answer to raising taxes rather it should be based on how individuals and companies fared during the lockdown.
After the pandemic, some governments will want to raise taxes to spread the cost of the crisis. They should be very careful in understanding who the losers are. My column for @bopinion. https://t.co/9DgUKApgRJ
— Ferdinando Giugliano (@FerdiGiugliano) April 21, 2020
Stephen Koukoulas, an economist, shared an article that details the views of 122 economists in Australia who have signed a letter against the easing of lockdown measures.
Koukoulas opined that although lockdown was the right response to containing the spread of the Covid-19 disease and saving lives, it also led to the increase in unemployment rate and folding of businesses.
He added that the government should consider implementing strong fiscal measures and gradual easing of lockdown measures to undo the damage caused by the pandemic.
The 122 economists do not look at the health costs of the ‘lock down recession’ in areas outside the COVID-19 space. There is evidence of higher risks of suicide, domestic violence, drug & alcohol abuse from the millions unemployed & in financial ruin. https://t.co/CVihCDoKtb
— Stephen Koukoulas (@TheKouk) April 20, 2020
Pam Herd, Professor of Public Policy at Georgetown University, shared an article detailing the number of workers who have filed for unemployment benefits in Florida. More than 1.5 million workers have filed for unemployment benefits in March but only 3% of them have received the benefits.
Herd noted that the consequences of relying on unemployment insurance are visible with many not receiving payments, while some being ineligible for the benefits.
The economic devastation that will flow from the reliance on unemployment insurance to provide relief is terrifying. And these consequences were easily foreseeable. https://t.co/AbyQVGb59C
— Pam Herd (@pamela_herd) April 21, 2020
Job market slump spreads amid growing economic gloom
The mining, oil and gas and automotive industries are the latest to see big falls in the number of active jobs.
The GlobalData jobs index – which counts posts open for application in real-time across the world – shows jobs in the automotive industry dropped by 16 per cent in the last week alone.
Jobs in mining were down 13 per cent and the automotive industry by 16 per cent. Over a slightly longer time-scale – since March 1 – the automotive, insurance and medical sectors have seen the biggest fall-off in active jobs.
Travel and tourism remains the worst-hit sector, with jobs down by 15 per cent week-on-week, and by a total of 61 per cent since the start of March. However, pharma and food service jobs have seen an increase.
Why UK Covid-19 deaths are being undercounted – and by how much
Data analysis from the New Statesman
Each day, in the early afternoon, the UK government announces a grim figure: the number of new deaths connected with Covid-19. But there are two problems with this statistic. One involves lag. Just because a patient’s death is reported on a particular day, this doesn’t mean that it happened on that day.
The second involves gaps. The government’s daily count doesn’t include people who died after contracting Covid-19 but either weren’t in hospital when they died, or were never formally tested.
In the New Statesman, David Ottewell examines new ONS figures showing that the government’s daily death totals are substantially lower than the actual number of Covid-19-related deaths on any given day.
Can governments escape prolonged recession?
Data analysis from the New Statesman
One of the striking features of the novel coronavirus outbreak is that it triggered near-unanimity among economists about how to tackle it. But now that unanimity is beginning to fracture: not over what should be done to weather the recession, but over whether the economy can in fact rebound. Initial hopes of a “Cape Cod economy” seasonal recovery have been replaced in some quarters by something far gloomier.
Why wasn’t the UK ready for Covid-19?
A long-read from the New Statesman.
In the UK, a lethal pandemic was considered by the government a “level 5” threat – the most serious security risk. The only other level 5 threat has been large-scale biological or nuclear attack.
The coronavirus closely resembles the threat anticipated in government planning documents, and yet the government appears to have been unprepared. The UK lacks ventilators, personal protective equipment and testing kits, while emergency procedures for manufacturers and hospitals are being improvised on the fly.
In the New Statesman, Harry Lambert suggests that Britain may in fact have been prepared, just for the wrong outcome.
Covid-19 daily death totals: “are we flattening the curve”?
While every nation is giving regular updates on deaths linked to the virus, it can be difficult to interpret this data. Daily death totals are volatile and can fluctuate rapidly from day to day; countries can change the time they report, or their methodology, leading to sudden and abrupt change.
In these charts we smooth out the data by using a rolling three-day average of deaths. Each day is plotted against the average number of new deaths reported over the previous three days. The percentage increases (or decreases) are plotted separately. The chart covers the countries where the highest number of deaths overall, excluding China – where daily confirm deaths have slowed to a trickle – and Iran, where the data may not be reliable. The charts start at the point each country passed 50 Covid-19 deaths in total.
Global GDP may drop by 1% in 2020, says Goldman Sachs
Goldman Sachs expects global real gross domestic product to contract by about 1 per cent in 2020, a sharper economic decline than in the year following the 2008 global financial crisis.
“The coronacrisis or more precisely, the response to that crisis — represents a physical (as opposed to financial) constraint on economic activity that is unprecedented in postwar history,” the investment bank said in a note to its clients published late on Sunday according to India Today.
OECD expects economic fallout to be felt ‘for a long time to come’
Speaking to CNBC, the OECD’s secretary general, Angel Gurria, stated: “What you have is an economic effect now that, very clearly, is going to be prolonged beyond the period of the pandemic.”
“We’ll hopefully get rid of the pandemic in the next two or three months and then the question is how many unemployed (will there be), how many small and medium-sized enterprises will be in a very, very severe situation if not disappeared by that time.”
“Life, and economic activity, is not going to be normalized any time soon,” he said. “We’re going to have the impact of this crisis for a long time to come.”