Coronavirus will cause Inflation

Coronavirus will cause Inflation

107 Views Published 5 months ago on Apr 21, 2020
Kashif  Raza
By Kashif Raza
Coronavirus will cause Inflation

The coronavirus is throttling the global economy. In a matter of weeks, the highly contagious disease has pushed the world to the brink of a recession more severe than the 2008 financial crisis. The depth and duration of the downturn will depend on many factors, including the behavior of the virus itself, public health responses, and economic interventions. 

Non Stop a Wave of Corporate Defaults

Given the extraordinary nature of the pandemic-induced crisis, fiscal and monetary policymakers are working without a playbook. Many, however, are already moving forward with stunning bailouts that could collectively top $10 trillion. Readings in early April suggested the global economy was sailing into colossal storm. “We anticipate the worst economic fallout since the Great Depression, managing director of the International Monetary Fund (IMF). Meanwhile, the Organization for Economic Cooperation and Development said its indicators produced the strongest warning on record that most major economies had entered a “sharp slowdown.” The World Trade Organization, for its part, forecast that nearly all regions of the world would suffer double-digit declines in trade this year, with North American and Asian exporters hit hardest.

Many governments have effectively frozen social and economic activity in all or parts of their countries to contain the outbreak, shuttering nonessential businesses and ordering residents to stay at home for weeks or months. Faced with the crisis caused by the coronavirus, of an unprecedented scale, this new budget is based on historically gloomy macroeconomic forecasts Billions of people worldwide remain under some type of lockdown. Visit for interesting facts about budget 2020. Major industries, especially airlines and other travel-related sectors, are on the brink of bankruptcy. The hope is that economies can power down without causing extreme disruptions, such as widespread business failures or joblessness, and then quickly get back up to speed after the pandemic abates.

Just how quickly governments should unshackle their economies is a matter of debate. In late March, U.S. President Donald J. Trump stirred controversy by saying he would like to start doing so in the United States by Easter on April 12. However, amid a rapidly mounting death toll from the coronavirus, his administration later extended its social-distancing guidance through April. Some Asian and European governments that feel they’ve contained the virus have begun to slowly reopen their economies, but new outbreaks have already caused some to re impose restraints.

For now, some economists hope for a strong global rebound in the third quarter, mirroring the recoveries in Asia after the Severe Acute Respiratory Syndrome (SARS) outbreak of 2003. However, others warn that the pandemic could be far more economically destructive than any past outbreak, and caution that a recovery could take much longer.

The world’s second-largest economy was stirring back to life in early April after suffering a withering blow from the coronavirus, which originated in the city of Wuhan in Hubei Province in late 2019. Several weeks of government-imposed lockdowns on dozens of cities led to double-digit percentage declines in factory output, retail sales, construction, and other economic activity. Urban unemployment reached a record high of more than 6 percent in February.

The German economy is expected to shrink for the first time since 2009, anywhere from 3 to 10 percent this year depending on the length of the country’s lockdown. In March, nearly a half million German companies applied to have their employees join a short-term government work program intended to prevent mass layoffs. The pandemic is paralyzing the British economy just as its leaders are negotiating a post-Brexit relationship with the European Union. Prior to the outbreak, there were already concerns about a recession from a so-called hard Brexit. Economists say that the coronavirus pandemic could take a 5 to 10 percent slice out of the economy in 2020.

The government is prepared to make interventions that would be unprecedented in the history of the British state” to support the economy, finance minister Rishi Sunak said in early March. Among its emergency measures, the Treasury has pledged to pay 80 percent of workers’ salaries for several months to keep companies from resorting to huge layoffs; offered to reimburse self-employed workers for lost wages; deferred tax payments; increased unemployment benefits; established a loan program for small and midsize companies; and provided rescue aid to charities.

The Bank of England has dropped its benchmark interest rate to 0.5 percent, a record low, and loosened capital requirements for banks. In an extraordinary move in early April, the central bank agreed to directly finance the government’s spending during the crisis, freeing it from having to issue debt in the bond market. All told, the rescue efforts could see Britain spend upward of 400 billion pounds, or about 15 percent of GDP. European Union. Eurozone finance ministers agreed to a 500-billion-euro package to provide emergency lending and other assistance to member countries, businesses, and workers. Christine Lagarde, president of the European Central Bank (ECB), has promised there will be “no limits” on the ECB’s defense of the euro zone. The bank is set to buy up to 750 billion euros in additional bonds this year to help its members amid the downturn.

Kashif  Raza

Kashif Raza
I am a professional blogger/writer and have been writing as a freelance writer for various websites. Now I have joined one of the most recognized platforms in the wo