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ECONOMY

Editorial: Put brakes on global recession by containing spread of infections

  • April 18, 2020
  • , The Japan News , 1:15 p.m.
  • English Press

Prevent infections of the new coronavirus from spreading and weather an unprecedented economic crisis. To that end, it is essential that major countries strengthen their cooperation and prepare for economic recovery in anticipation of an end to the pandemic.

 

The International Monetary Fund released its world economic outlook, predicting that the global economy will contract by 3% in 2020. It projects that the contraction will surpass the negative growth of 0.1% in 2009, after the Lehman shock, and warned “the global economy will experience its worst recession since the Great Depression.”

 

Each country needs to take necessary measures by recognizing the severe circumstances.

 

According to the IMF, countries have taken economic measures totaling $8 trillion, or about ¥860 trillion, including fiscal stimulus and tax reductions. With monetary easing policies taken by central banks of major countries, the financial market is emerging from a state of panic.

 

Nonetheless, the actual economy has been deteriorating rapidly. In the United States, the number of people newly applying for unemployment benefits has exceeded 22 million in total in the past month.

 

China’s real gross domestic product in January-March this year fell 6.8% from the same quarter last year, marking its first-ever negative growth. The pace of economic recovery in China will be moderate while the economies of major export destinations Japan, the United States and European countries remain sluggish.

 

The top priority for the global economy is how to prevent the spread of infection.

 

Major countries should share information on the infectious disease and cooperate in developing medicines and medical equipment. They are also urged to provide relevant knowledge to emerging and developing countries where medical systems are fragile. The United States and China should not waste time confronting each other.

 

The leaders of the Group of Seven advanced economies, including Prime Minister Shinzo Abe, agreed on the view that arrangements should be started in advance for resuming economic activities smoothly.

 

By the time the situation returns to normalcy, companies should be prevented from going bankrupt so as not to undermine the industrial base. Employment should be preserved as much as possible. Each country is expected to make the utmost efforts to realize a robust economic recovery.

 

Securing materials for manufacturing at factories will be a challenge. Global supply chains, supply networks for components, should be shielded from disruption.

 

It is important that major countries strive to maintain the free trade system in order to restore stable growth in the global economy.

 

Unfortunately, moves toward restricting exports of medical supplies or agricultural products are seen in some countries. The impact of the Great Depression, triggered by the stock price crash in the U.S. market in 1929, was prolonged by the rise of protectionism worldwide. The same mistake should not be repeated.

 

In the aftermath of the pandemic, how to stimulate consumption will become another important matter. Preparation needs to be started for devising a policy framework that prompts consumers to spend their money on the hard-hit businesses of hotels, airlines and restaurants.

 

— The original Japanese article appeared in The Yomiuri Shimbun on April 18, 2020.

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