Global Economic Crisis and Reform after Covid-19
Adarsha Subedi / Kathmandu: The year 2020 has not been something we envisioned or expected yet something we needed to adjust to. An infection known as COVID – 19 so threatening surfaced in our current circumstance closing the whole world down. As per the WHO, COVID – 19 has disturbed in excess of 100 million lives and caused death of 2.2 million individuals as of now. Nations went into a prompt lockdown to end the spreading of the infection. Except health and essentials all other sectors stopped working. The reopening process has started but with COVID – 19 still in spread the global economy’s long absence back to pre-pandemic levels of activity remains prone to setbacks with new strains of viruses.
COVID-19 impact on Global Economy
The World Economic Outlook by the IMF have a few projections of the financial development of the world. The worldwide growth rate is extended at – 4.4% for the rest of 2020 significantly less than anticipated previously. This less contraction than anticipated is clarified by the exercises in the serious economies as hustle began sooner than anticipated because of downsized lockdown. Despite the fact that IMF have anticipated for a solid third quarter the development of 5.2% is just expected in 2021 considering hazards still and the continuation of social distancing. Periods after 2021 has 3.5% expected moderate growth by the IMF which misses the mark regarding the advancement towards making up for lost time to the way of financial movement of 2020-25 preceding the pandemic for both progressed and developing business sectors and economies. Whilst the expectation for living standard takes an extreme hit and as the pandemic will turn around progress made since the 1990s in diminishing worldwide deprivation and will expand imbalance. Individuals who depend on every day wage work and are outside proper security net confronted abrupt pay misfortunes when versatility limitation was forced.
The uncertainty regarding the damage of supply can run a huge risk with policy decisions as the clear – cut analysis of which supply has been disrupted and which needs immediate attention is unclear. Progress with immunizations and medicines, just as changes in the working environment and by clients to diminish transmission, may permit action to restore more quickly to pre-pandemic levels than as of now anticipated, without setting off rehashed influxes of expansion. Furthermore, an expansion of financial countermeasures into 2021 could likewise lift growth over the figure, which factors in just the measures actualized and declared up until this point. In the event that the infection resurges, progress on treatment and immunizations is more slow than foreseen, or nations admittance to them stays inconsistent, financial action could be lower than anticipated, with reestablished social removing and more tight lockdowns.
Besides combating the inevitable recession policymakers also have to tackle challenges to place economies on the path of higher productivity growth and design policies with an eye to guiding the economies to a path of stronger and resilient growth. Tax and spending measures taken should launch initiatives to lift potential output and make sure of participatory growth that benefits all involved and protect the vulnerable. Investments in health and high return infrastructure projects will help the economy.
The IMF have made an arrangement to manage the remaking of the economy after lockdown is finished. They have summed up in three classifications: Gradual opening under conviction, pandemic leveled out and post pandemic monetary change plan. Post pandemic plan may soon come into fruition with the manufacturing and distribution of vaccines started all-over the world. UK started vaccination of elderly and first responders soon followed by USA. Pfizer and Moderna vaccines are administered in this country whereas China, India and Russia have also developed their own vaccines and started distribution and usage. Majority of the countries are pledging reform packages to inject their economy with USA recently announcing $1.9 trillion Covid relief plan. As well as other countries like Japan (21.1%), France (6%), Russia (3%) and many more have apportioned some percentage of their GDP to combat crisis created by the pandemic. But even with all this planned, discovery of the new strain of same virus can make processing of these tasks challenging.
Impact on Nepalese Economy
Nepal is also facing immense consequences from the COVID -19 pandemic. The impact in the industrial sector especially in construction sector – as most of the big projects which have contribution in overall national economy like employment generation, capital expenditure and overall development of the country – has been stalled. Other industrial sectors like the small and medium industries, they have also been adversely affected. A recent survey conducted by Nepal Rastra Bank has shown that only four percent industries were on fully operation, 35 percent were partially operated and 61 percent industries were fully closed down. ILO report on labor market impact in Nepal clearly indicates between 1.6 and 2.0 million jobs are likely to be disrupted in Nepal in the current crisis, either with complete job loss or reduced working hours and wages. Another badly hit sector is the transportation, which still has substantial contribution to the GDP. A preliminary study report prepared by NPC experts about covid-19 impact on Nepalese economy has disclosed many losses in the economy. NPR. 198 billion (5.6 percent) loss in GDP, 1.6 million job loss, 25 percent contraction in government revenue and expenditure, 8.7 million students deprived from learning as well as salaries of one hundred sixteen thousand private school teachers face uncertainty. This may also increase poverty level. Study shows 1.2 million people are already pushed back below poverty line due to the pandemic.
In order to feed the injured economy, Government of Nepal has also announced various stimulus packages through the budget like increasing the employment opportunities by creating 0.8 million jobs in present fiscal year. Nepal Rastra Bank also brought different programs and the government also set up NPR 50 billion special fund for providing low interest credit facility to the Covid-19 affected people and announced to increase refinancing fund to hundred billion. The Monetary Policy of Nepal 2020 has made the process of lending and borrowing process favorable for the various sectors of businesses to help them run in this destitute situation. Subsidized loans are to be provided at 5%.
Our target is high economic growth, employment generation and increase in investment, but the economy is at a standstill. The contribution of manufacturing industries to GDP is only 5.09 percent in fiscal year 2019/20, comparing the total 13.7 percent contribution of industrial sector in the economy. Hence, the reform agenda should focus on industrial development including employment generation programs targeting the unemployment youths adding foreign back labors and job lost human resources of the country and prioritize manufacturing industries and the construction sector. We need to focus on big infrastructure including electricity, road, irrigation among others. As well as necessary to prioritize tourism and transportation sector, which have important contribution to the national economy. The other focus should be the upliftment of marginalized people and their fragile condition. We need to contribute in the education and health sectors based on the human development indicator.
Conclusion
There are new strains of virus arising from UK and South Africa. Due to the easiness in lockdown and travels these new viruses are spreading easily. Even though vaccine has been made, full safety measures and health standards with social distancing have to be followed to end the pandemic. Following full safety protocols until the vaccine reaches all parts of the world is a must or else our effort is useless. We need to keep this in mind and focus on the future. Covid is an historic event in recent memory and has exposed our weaknesses. We need to take this chance to learn our short comings and work to build a strong economy. Manufacturing and production-based economy goes a long way than trade-based economy. Pandemic showed relying on import every time is not feasible and focusing on home grown items is the best solution in the long run. This is a decent second and golden opportunity to restructure the existing trade-based and agriculture led economy into production-based one. So, Government should focus on economic reform on these areas. This will be milestone to boost up our disoriented economy.
(Editor’s Note: Mr. Adarsha Subedi is undergraduate student at Kathmandu University School of Arts. Mr. Subedi has keen interest on economics, finances and policy making. Nepalekhabar has been promoting creative ideas and write up of young people. How do you find this article, please share your comment at : info@nepalekhabar.com)