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Measures needed to stimulate global economic recovery

Author  :  ZHAO YUAN     Source  :    Chinese Social Sciences Today     2020-07-06

Projection of global economic recovery in the next two years Photo: OECD

The baseline forecast envisions a 5.2% contraction in global GDP in 2020, according to the latest Global Economic Prospects released by the World Bank on June 8. The economic shock sparked by COVID-19 requires more actions that can lead to sustainable growth.

Ayhan Kose, director of the World Bank Group’s Development Prospects Group, said that further forecast downgrades may be in store, thus additional policy measures to support activity may be needed in the coming months. Although regional growth in East Asia and the Pacific is projected to slow sharply in 2020 to 0.5%, it may be the only region in the world that can realize positive growth. The severe economic impact of the pandemic has been acutely felt across the European and Central Asia region, where the economies are projected to shrink by 4.7% this year. The regional economy of Latin America and the Caribbean is projected to be reduced by 7.2% in 2020. 

According to the recently released OECD Economic Outlook, the world economy is now experiencing a deep recession while unemployment is soaring across the globe. Growth prospects rely on many factors, including how the pandemic prevention and control goes and the implementation of fiscal and monetary policies. Uncertainty is likely to persist for longer.

Dennis Snower, a professor at the Hertie School of Governance in Berlin, said that the key to boosting the global economy is to reduce resource misallocation in certain industries. In addition, governments should guide the labor force towards booming industries, and provide relevant services to boost employment. 

Kristalina Georgieva, managing director of the International Monetary Fund, said that all governments have to gear up for a more inclusive recovery. First, we need to deploy substantial fiscal stimulus to boost growth and employment. Second, we need to invest more in education. Not only in schools and distance-learning capacity, but also in the quality of education and access to life-long learning and skill training. Third, enormous fintech opportunities exist in developing economies. That’s why we need to leverage fintech to help more people benefit from digital technologies. Meanwhile, governments need to manage fintech risks, reduce inequality and foster inclusive growth.

Currently, the global economy shows signs of recovery, the same with China’s economy. China’s economic development has benefited from growing domestic demand and the country’s huge investment in infrastructure, said Jonathan Woetzel, a director of the McKinsey Global Institute. By taking the environment into account, green finance helps to recover the economies of all countries. 

Alan Wolff, deputy director general of the World Trade Organization (WTO), held that joint actions are essential to addressing the global challenge. International cooperation is the essence of multilateralism and can lead to better outcomes. Therefore, we need to coordinate the interests of all parties, and let the multilateral trade system fully play its role in helping the world deal with the health and economic crisis. By the time the pandemic-related trade measures are in place, the WTO will need to help countries recover their economies.

The OCED Outlook has provided a series of suggestions regarding the measures that can be taken to stimulate economic growth. First, invest in health by enhancing health care systems and ensuring global cooperation to develop and distribute a vaccine and treatments. Second, help people and businesses in the hardest hit industries move into new activities and strengthen income protection. Third, facilitate rapid firm restructuring and speed up digitalization. Fourth, build more resilient supply chains that have larger stocks and more sources. Fifth, invest in public finances for people’s well-being while focusing on fairness. 

 

(Edited and translated by NIU XIAOQIAN)

Editor: Yu Hui

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