Terrestrial and Celestial Forces Expose Vulnerable Economists: Financial Crisis 2008 vs. 2020
The job of economist is to evaluate economic issues, analyze past economic trends and forecast the economic outlook. Economic forecasting is the process of attempting to predict the future condition of the economy using a combination of widely followed indicators or factors that affect economy. The economist conducts statistical tests and develops statistical models to determine which relationships best describe or predict the behavior of the variables under study. The experts rely on past experience and available economic data which they consider influence the outcome. It is establish fact that history never repeats. The experts fail to anticipate all the influencing factors and its quantum of effect on ultimate outcome. In an attempt to break basics of economy, Sapovadia noted in his work; whenever recession looms around, experts start blaming policy paralysis, wrong policies, policy implementation and vision of the government. Policy makers, their advisers and economist will think around narrow technical aspects of ‘economics’. Economists will talk about structural problems. Hardly someone goes beyond investment, demand, supply, saving, inflation and bank rates (Vrajlal Sapovadia, 2019). Economic forecasting is often described as a flawed science. The recent ‘coronavirus’ outbreak have once again proved that celestial forces can mangle terrestrial planning and forecast. Till end of February 2020 no one realized catastrophic impact of epidemic spread of deadly virus that virtually shaken the Chinese economy, known as dragon. Within three months of the outbreak, epidemic spread limited to China became pandemic hounding more than one third of the world’s countries (at least 66 countries) and over half of the global population.
The OECD's latest Interim Economic Outlook, published Monday, March 2, 2020; said the spread of COVID-19 beyond China is causing "human suffering and economic disruption." ... Under a best-case scenario of limited outbreaks outside China, world growth is expected to be 2.4% in 2020, down from a November projection of 2.9%. The Paris-based think tank lowered the global growth projection for this year by 0.5 percentage points, while prospects for China was revised down markedly, with growth seen slipping below 5 percent this year. In the Interim Economic Assessment, the OECD said global GDP growth is projected to drop to 2.4 percent in 2020 from an already weak 2.9 percent in 2019. The forecast for 2021 was trimmed to 3.3 percent from 3.6 percent. The OECD urged governments to act swiftly and forcefully to overcome the coronavirus and its economic impact. If downside risks materialise, and growth appears set to be much weaker for an extended period, then co-ordinated multilateral actions should be taken, the agency added. The adverse impact on confidence, financial markets, the travel sector and disruption to supply chains contributes to the downward revisions in all G20 economies in 2020, particularly ones strongly interconnected to China, such as Japan, Korea and Australia. Although the effects of the coronavirus outbreak on the US and Canada are projected to be relatively mild, the decline in confidence, disruption to supply chains and weaker external demand will moderate growth prospects, the OECD said.
Contrast with 2008 Financial Crisis:
The 2008 global financial crisis was result of terrestrial sins of few greedy but elite people working in banking, financial and insurance sector. The cure of crisis was within terrestrial players. Several government bailouts packages and with passing of time the affected sectors were able to revive. In the process few big corporate houses and thousands of businesses vanished in history. Over a period, investigation agencies and experts were able to uncover the sins which made possible to control the known factors. Possible 2020 global crisis is literally beyond control of terrestrial forces. First, till date no medicines or vaccines are available to outplay corona virus. Second, experts are still struggling to gauge extent of impact on key economic sectors and overall economy. The globalization has hardly kept any country or economic sector insulated from global impact. The trade and free people movement have made everything vulnerable. The global interdependencies and economic sector is so huge that breaking a bead act like breaking vertebrae of the spinal cord and all supply chain may collapse. Output contractions in China are being felt around the world, reflecting the key and rising role China has in global supply chains, travel and commodity markets. Subsequent outbreaks in other economies are having similar effects, albeit on a smaller scale. Growth prospects remain highly uncertain (OECD, 2020).
As reported in the eturbonews; Dubai’s Emirates Group has seen a “measurable slowdown” in business from the coronavirus outbreak and has asked staff to take paid and unpaid leave, according to an internal email seen by Reuters News agency. The trend canceling major routes, followed by not so major air-connections is now also affecting Emirates Airlines and seems to be a set by set development in the global aviation industry. Depending on how COVID-19 is growing and expanding, airline routes will follow through. Experts are talking about air traffic altogether to get the spread of Coronavirus under control. The cost for this would be so tremendous, unable for most airlines to comprehend. Emirates as one of the healthiest aviation company may set an unwelcome lead. Emirates Group, which runs the world’s biggest airline by international traffic, is encouraging staff to take leave as the coronavirus outbreak slows demand for travel. The United Arab Emirates has been an excellent country able to keep virus infections from expanding counting 21 cases. The UAE is a country with workers and visitors from all regions on the globe, and Emirates is the airline transporting a large percentage of everyone arriving.
Experts are studying the sectors that may be crucial in maintaining global growth, but are victim of darkness over time within which corona virus will be controlled. The spread is so fast and random that all the continents are under the shadow of the deadly dieses. The victim nations include highly developed to under develop nations. It is worrisome that countries that lack basic health infrastructure will be having prolonged contagious effect on themselves and the whole world.
As per OECD report, on the assumption that the epidemic peaks in China in the first quarter of 2020 and outbreaks in other countries prove mild and contained, global growth could be lowered by around ½ percentage point this year relative to that expected in the November 2019 Economic Outlook. Other agencies and experts are projecting based on different assumption about the time frame, affected countries and economic sectors. The major concern shall be the ability to understand nitty gritty and nuances of interdependency of economic sectors. The forecast will therefore remain in the hands of celestial forces, how they reveal its secrets over period of time.
2020 global crisis expose vulnerability of economists and experts and its burden will pass on the governments and the common mass. Pandemic virus spread will have irreversible loss to those who lose life and their family members, the financial cost they suffer in short and long period or permanent. Declining GDP growth will have lasting impact on unemployment, inflation and weakening financial sector. It will be one of the biggest challenges the world is facing today, how terrestrial power will overcome celestial attack. It does not mean that we will fail. Our scientists are working hard to control corona virus. The experts are working to gauge its impact and governments are working to check the negative impacts.
Sapovadia, Vrajlal K., Economic Slowdowns: Fundamentals Overshadowed by Structural and Policy Problems (October 29, 2019). Available at SSRN: https://ssrn.com/abstract=3477618 or http://dx.doi.org/10.2139/ssrn.3477618
OECD Interim Economic Assessment, Coronavirus: The world economy at risk, 2 March 2020. Available at: https://www.oecd-ilibrary.org/docserver/7969896b-en.pdf?expires=1583195244&id=id&accname=guest&checksum=F355EECA92FB99310C2BAC4145EBFD0E
Emirates Airlines about to shut down due to Coronavirus? 1, March 2020. Available at: https://www.eturbonews.com/565195/emirates-airlines-about-to-shut-down-due-to-coronavirus/