The coronavirus microbe has overthrown our arrogance and sent global output into a tailspin, says the Financial Times' Martin Wolf.
In advanced economies, the forecast is of a 6.1 per cent contraction this year, followed by a 4.5 per cent expansion in 2021. All this may prove too optimistic.The IMF offers three sobering alternative scenarios. In the first, lockdowns last 50 per cent longer than in the baseline.
Under longer lockdowns this year, global output is 3 per cent lower in 2020 than in the baseline. With a second wave of infections, global output would be 5 per cent below the baseline in 2021.Under the latter possibility, government spending in advanced economies would be 10 percentage points higher relative to GDP in 2021 and government debt 20 percentage points higher in the medium term than in the already unfavourable baseline.We have no real idea which will prove most correct.
But it is essential to prepare for that day, by creating vastly-enhanced capacities to test, trace, quarantine and treat people. No expense must now be spared on this, or on investment in creating, producing and using a new vaccine. The negative-sum economic nationalism that has driven Donald Trump throughout his term as US president, and has even emerged within the EU, is a serious danger. We need trade to flow freely, especially in medical equipment and supplies.
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