Countries will struggle to return to growth until vaccine becomes available – leading macroeconomic influencers

26 October 2020 (Last Updated October 26th, 2020 10:54)

Countries will struggle to return to growth until vaccine becomes available – leading macroeconomic influencers
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As second wave of Covid-19 infections continues to impact countries across the world, the possibility of a V-shaped recovery for the global economy remains weak until the availability of a vaccine. China, however, has managed to move towards V-shaped recovery due to the early containment measures adopted. Macroeconomic influencers share their views on the Covid-19 impact.

Ludovic Subran

Ludovic Subran, group chief economist at Allianz, shared an article on how China is on the way to achieving a V-shaped recovery even in the absence of a fully tested vaccine. China’s economy expanded by 4.9% in the third quarter, while other countries were trying to manage the Covid-19 pandemic.

The article noted that the measures undertaken by China to control the virus played a key role in enabling activity to return to normal within few months. Further, the country is insulated from fluctuations in the global demand compared to other countries. The article also highlighted that until the global availability of a vaccine, other countries will struggle to achieve the China’s growth.

Daniel Lacalle

Daniel Lacalle, chief economist at Tressis SV, shared his views on recession and weak economic recovery. He noted that injection of liquidity in the current pandemic crisis may create a situation where stimulus and funds may be directed to the wrong side of the economy. Stimulus packages and aid will, therefore, defeat the purpose of encouraging investors and companies to invest more in activities that will support the economy, he added.

Lacalle opined that a large part of the liquidity injection goes towards sovereign debt and companies that already had enough credit and capital to survive the pandemic. He added the funds are being used towards sectors that already had high structural imbalances such as airlines and automotive. Lacalle noted that directing funds towards micro companies and small businesses is essential to avoid a prolonged recovery from the pandemic.

Brett House

Brett House, deputy chief economist Scotia Economics, shared statistics on the performance of Latin American countries amid the pandemic. According to the data, inflation across Mexico remained above the upper limit set by Bank of Mexico. Core inflation remained at 4.4% on a year-on-year basis.

Further, Argentina’s economy registered a marginal growth of 1.1% on a month on month basis. However, 14 of the main sectors in the country underperformed on an annual basis except for financial services that registered a growth of 4.4%. The country’s trade surplus also declined from $1.4bn to $0.6bn.

Colin Williams

Colin Williams, professor of public policy at the University of Sheffield, shared an article on analysis conducted by Resolution Foundation, a thinktank, on the flaws in UK Chancellor Rishi Sunak’s $16.55bn (£12.7bn) self-employment income support scheme (SEISS). The research has indicated that the scheme disbursed $1.69bn (£1.3bn) to workers who did not lose any income due to the pandemic, while more than 500,000 people did not receive any support.

The article noted that 78% of claimants under the SEISS lost income but the amount lost by several claimants was smaller than the amount claimed. Further, 67% of self-employed people who lost income due to the pandemic did not claim for income under the scheme. Strict eligibility and weak assessment rules were attributed as the reasons for the issues with the scheme. Some of the applicants were unable to prove their eligibility for the scheme, the article added.