The global recession caused by the new crown pneumonia epidemic may turn into a very tragic crisis!

By: MR. Knight Mar. 17,2020

Four former International Monetary Fund chief economists said the global economy had fallen into recession.

Olivier Blanchard, a senior fellow at the Peterson Institute, said: "(The first half of this year) there is no doubt about negative growth."

Kenneth Rogoff, a current professor of economics at Harvard University, also said, "At present, the global economic recession seems to be unavoidable, and the probability of outbreaks exceeds 90%."

The reason for the four judges' conclusions is that the new crown pneumonia epidemic and the aggressive actions taken by various countries to curb the spread of the virus are the "pushers" for the global recession.

Maurice Obstfeld, who now teaches at the University of California, Berkeley, said a series of recent events "is tantamount to an evil cocktail" for global growth.

Raghuram Rajan, a former governor of the Indian central bank, believes that the severity of the economic downturn depends on the success of the authorities in containing the outbreak. It is hoped that the response of the authorities will be decisive and rapid. "Long delays will obviously cause greater pressure on the entire system," said Rajan, who currently works at the University of Chicago Booth School of Business.

Raghuram Rajan's main concerns are the secondary damage to the economy from the epidemic, including business closures, increased unemployment, reduced demand, and shocked confidence.

Significantly slow down?

In the definition of the IMF, a recession is considered if the economic growth rate is less than 2.5%.

Given the increase of 2.9% last year, according to the above view, four economists believe that the global economic growth rate will slow down by at least 0.5% this year.

And just in January, the IMF also predicted that the global economic growth rate this year would reach 3.3%.

The recent IMF current president, Georgiyeva, said earlier this month that the rapid spread of the epidemic has dashed hopes for stronger economic growth in 2020. She made it clear that the global economic growth rate this year will be lower than last year's 2.9%.

Four top economists warn: global recession has arrived

Joint rescue

Facing the sudden epidemic situation, the world ’s central mothers are working together to save the market and work hard to prevent the economy from failing.

The Fed simply did not wait for the interest rate meeting on March 19, hurriedly cut interest rates by 100 basis points in the evening of the weekend, directly reduced the interest rate target range to 0-0.25%, and launched a $ 700 billion debt purchase measure.

Unexpected interest rate cuts have triggered follow-up actions in many countries, including Hong Kong, New Zealand, and Canada.

Last week, the Federal Reserve announced that it would provide a large amount of short-term loans directly to banks and purchase government bonds to inject $ 1.5 trillion in liquidity.

Previously, according to media statistics, as of March 12, countries had launched economic revitalization measures of more than 130 billion U.S. dollars, including 50 billion U.S. dollars in epidemic prevention funds.

The European Union proposes contingency measures including a $ 37 billion investment plan and allows countries to suspend fulfilling budget commitments. Germany plans to devote € 550 billion in special funds to help companies affected by the outbreak.

At the same time, some temporary measures have emerged in the financial markets. Five countries including Spain, Italy, the United Kingdom, South Korea, and Turkey announced a ban on short selling. Spain bans shorting all tradable shares that have fallen more than 10% on March 12, and all non-current shares that have fallen more than 20%, involving a total of 69 stocks.
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