Global economy in deep trouble

The fears of global economy entering a recessionary phase are increasingly coming true thanks to ever-rising cases of COVID-19 around the world.

As on Friday, over 2.5 lakh cases of the transmittable infection caused by a novel strain of coronavirus originated in China, were registered across the world, while over 10,400 people have died so far due to the virus.

Further, deaths in Europe exceeded those in Asia where the virus first came to light, which indicates that COVID-19 is spreading faster than estimated thus far.

Apart from precious lives the world is losing because of the novel virus, global economy is also in peril now with vital sectors ranging from travel, tourism to technology, getting drastically impacted.

The US, the world's largest economy, closed its doors to Europe to control the contagion even as China, considered as the global factory, is still battling the aftereffects of the virus that originated inside its territory.

There are ample indications that the global economy is heading into recession. According to a report by The Economist Intelligence Unit (EIU) released on Wednesday, global economic growth is likely to shrink to mere 1 per cent from earlier projection of 2.3 per cent in 2020 and four major economies including Japan, Italy, Germany and France are expected to experience full-year recession this year.

It pegged China's growth in 2020 at a historic low of 2 per cent and said Euro zone would suffer a full-year recession (0.5 per cent).

But, other projections of the report are more daunting. It estimates that coronavirus will infect around 50 per cent of the world population. Further, 20 per cent of the cases will be severe and 1-3 per cent will result in deaths.

If these projections come true, the world is staring at tumultuous times, both economic and social. Moreover, the economic cost of corona outbreak will be beyond imagination and immeasurable.

However, the world has two options to contain the damage to its human life as well as economic fabric that the virus is projected to cause. It should contain the spread of virus at the earliest possible. That can only happen if all the countries make a coordinated effort.

Given the speed at which corona is spreading now, there is no harm in banning all international air travel forthwith. That will help countries handle the situation better and restrict spread of virus to a minimum number of geographies.

On this front, there is a lesson to be learnt from the way China handled the outbreak. It completely isolated Hubei province where the virus was first noticed.

Thus, it succeeded in preventing the virus spreading to its other provinces. On the economic front, there is a need for effective stimulus measures to protect the sectors most impacted by the virus.

Aviation sector is bleeding. So are the hospitality and tourism sectors. Other sectors will also be in the firing line. As a consequence, millions of people will be rendered jobless in near future as companies will struggle to generate enough revenues.

Without stimulus measures, it is not easy to restore normalcy in the global economy. And India is not immune to all this as virus cases are steadily rising in the country.

It is time for proactive steps to allay fears and put economies back on higher growth track!