Brief impacts on the global economy during the Covid 19 period
Monday 23/03/2020 – 11:59
Article by economist D. Zakontinos on bankingnews.gr ( https://bankingnews.gr/index_mob.php?id=489790 )
Undoubtedly, China's economy has been negatively affected, with an essentially unknown recession index and a recovery horizon that will depend on the global situation.
However, we quote a forecast from DEUTSCHE BANK which predicts a change in real GDP in the second quarter of 2020 of 34%.
At the same time, the decline in Chinese product production inevitably affects the economies of other countries that supply it with raw materials and energy.
The exact same parameters govern the European Economy (Deutsche Bank GDP decline in Q2020 23,6 of XNUMX%), simultaneously highlighting the absence of a unified European expression as the phenomenon of individual actions by each state in taking measures to address the pandemic is observed.
In addition, the European lack of solidarity among the members of the union is once again observed, which is currently typical in the case of Italy, which is fatally affected by the virus and where only Russia and China offered to help by sending medical aid, when at the same time Germany was banning the export of similar materials.
Regarding the response to the economic impacts beyond the measures announced by each country, the Commission was forced to de facto suspend the rules of fiscal discipline, while at the same time the ECB, through Ms. Lagarde, announced the reinstatement of the quantitative easing (QE) measure, this time including our country, which may help it avoid the involvement of the European Stability Mechanism to support its economy.
Similar measures were announced in the UK, while in the US, Mr. Trump, who was declared president in a time of war, announced the strengthening of the economy with a package that will exceed one trillion dollars.
Also, an important parameter that significantly affects the global economy is the reduction in the consumption of black gold, which brought to the fore the oil war between the Kingdom of Saudi Arabia and Russia.
The reason was the Russians' demand that OPEC reduce global production, which if accepted threatened the Saudis with a reduction in their share of the global market, and of course its rejection resulted in a further reduction in the price of a barrel.
In addition, the reduced oil prices give the Russians the opportunity to pressure American shale oil and natural gas producers and to put aside for the time being their threat to Russian interests in the global market, as they will not be able to proceed with further production due to increased costs.
On the other hand, lower oil prices are a blessing for industries, transportation and households, which mitigates the losses and impacts of the Covid-19 pandemic.
Dimitris A. Zakontinos
Economist- MCs strategic & defense analyst
Former Vice President of ELISME
www.bankingnews.gr