October 31, 2020 House of Trust

Covid-19: Act Fast & Do Whatever it Takes!

As of March 24th 2020, there are already over 384,000 cases of Coronavirus worldwide, with 16,591 deaths. Though over 102,000 have recovered globally, this pandemic is not showing any signs of slowing down.

*Total Confirmed Cases of Covid-19 per million
Picture Source: Our World in Data

What was initially viewed as a ‘Chinese problem,’ and then an ‘Italian-Iranian-Korean problem’ has nightmarishly evolved into an ‘everybody problem’. In fact, the virus continues to spread in the Middle East and Africa, after paralyzing much of Asia and Europe.

Experts agree that the Coronavirus pandemic will have devastating effects on the global economy, which will be more intense than and distinct from those experienced during the 2008-2009 global financial crisis.

Specifically, this virus has and will continue on to endanger human health and weaken the global economy through both supply and demand shocks. This is through the interruption of global production chains, the loss of income and profitability due to higher unemployment rates leading to severe difficulties to fulfill debt service obligations.

In addition, recent measures to control the spread of the virus such as quarantine, social distancing, closures of educational institutions, temporary shutdowns of non-essential businesses, and the current Control Movement Order as seen in Malaysia; are all causing economies to come to a screeching halt.

In other words, containment policies will flatten the medical curve (reduce the growth of new cases) but steepen the economic recession curve, as depicted in the diagram below:

Source: Centre for Economic Policy Research (CEPR)

As a result, high-profile economists from around the world are calling for swift and radical policy action to mitigate the highly severe economic damage from this global pandemic. These great minds contributed to an ebook published by the Centre for Economic Policy Research (CEPR) entitled “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes“.

Source: CEPR Policy Portal

In a unanimous call for decisive and coordinated fiscal stimulus, they strongly advocate using heavy fiscal firepower for a “whatever-it-takes” economic response to the Covid-19 crisis.

Helicopter Money
Source: European University Institute

Several interesting yet drastic measures from this book include:

  • Helicopter money,’ where everyone gets a no-strings-attached handout
  • Eurozone countries using eurobonds to issue debt together rather than individually
  • State investment banks providing unlimited emergency lending to firms
  • Reduce the number of personal and corporate bankruptcies, ensure people have money to keep spending even if they’re not working
  • Increase public investment and healthcare spending
  • Households and businesses hit by supply disruptions and a drop in demand could be targeted to receive cash transfers, wage subsidies, and tax relief, helping people to meet their needs and businesses to stay afloat
  • Unemployment insurance could be temporarily enhanced by extending its duration, increasing benefits, or relaxing eligibility
  • Central banks should be ready to provide ample liquidity to banks and nonbank finance companies, particularly to those lending to small and medium-sized enterprises
  • Broader monetary stimulus, such as policy rate cuts or asset purchases, can lift confidence and support financial markets if there is a marked risk of a sizable tightening in financial conditions

The national governments certainly have a big role to play, especially in reducing the economic scar tissue by addressing all the red crosses in the following diagram:

Source: Centre for Economic Policy Research (CEPR)

**For the full ebook, refer to the attachment below:

Related Posts

Weekly Economic Update (Week 1 of February 2020)

February 5, 2020

February 5, 2020

I. Bank Negara Malaysia reduces Overnight Policy Rate[1] (OPR) to 2.75 percent 25 basis point reduction (second time in less than 6...

Emerging Consumer Survey 2019

March 26, 2019

March 26, 2019

Credit Suisse Research Institute published the ninth edition of the Emerging Consumer Survey, a study that draws on the annual...

A Call to Action

May 9, 2019

May 9, 2019

Al-Sharq Youth Conference 2019 For the first time ever, Malaysia was chosen to be the host of the 2019 Al-Sharq...

Special Committee on the Economy of the Future

January 16, 2018

January 16, 2018

Our world’s economy is experiencing such a great transformation, especially in terms of the rapid digitalization of the economy. Many...

Fiscal Sustainability, Entrepreneurial State and Societal Well-Being

October 10, 2018

October 10, 2018

Summary of YB Lim Guan Eng’s Luncheon Address at Khazanah Megatrends Forum 2018 At Khazanah Megatrends Forum 2018 held on...

Pertumbuhan Ekonomi Malaysia Q1, 2019

May 16, 2019

May 16, 2019

Jabatan Perangkaan Malaysia telah melaporkan Prestasi Ekonomi Malaysia suku tahun pertama 2019 pada 16 Mei 2019. Secara keseluruhannya, Ekonomi Malaysia...

5 Perkara Anda Perlu Tahu Tentang Bajet Johor 2018

November 24, 2017

November 24, 2017

5 Perkara Anda Perlu Tahu Tentang Bajet Johor 2018 Post Views: 182

Statut Rom dan Kedaulatan Negara

April 1, 2019

April 1, 2019

Sejak kebelakangan ini, isu Malaysia menandatangani Statut Rom atau ‘Rome Statute’ kerap dibincangkan dan dibahaskan oleh pakar undang-undang. Hal ini...

Business Sentiment Report 2019/2020

January 10, 2020

January 10, 2020

The annual Malaysian Business Sentiment Survey 2019/2020 conducted jointly by Monash University Malaysia and CPA Australia identifies key issues that define...

Malaysian Economic Monitor (December 2018)

December 18, 2018

December 18, 2018

On 18th December 2018, the latest edition of World Bank’s Malaysian Economic Monitor on ‘Realising Human Potential’ was launched at...

Saranan Cukai Kekayaan

January 2, 2019

January 2, 2019

“Cukai progresif adalah kunci untuk memacu pertumbuhan ekonomi sambil menutup jurang antara golongan kaya dan miskin.” Joseph Stiglitz, pemenang Hadiah...

Solidariti bersama Masyarakat Islam Xinjiang

October 2, 2019

October 2, 2019

Pada 25 hingga 28 Feb 2019, Dr Abdul Razak Ahmad, selaku Pengarah Pengasas Bait Al-Amanah telah dijemput untuk menghadiri “Thematic...

For Malaysia to succeed…

April 23, 2019

April 23, 2019

“For Malaysia to succeed, the Malays must succeed”.  The statement above was quoted by Tun Daim Zainuddin in the seminar...

Ucapan Tun Dr Mahathir Mohamad pada UNGA ke-73

October 1, 2018

October 1, 2018

Bait Al Amanah berasa bangga dengan Tun Dr Mahathir Bin Mohamad atas ucapannya dalam Perbahasan Umum Sesi ke-73 Perhimpunan Agung...

Comments
Leave a Reply

Your email address will not be published. Required fields are marked *