World Economy to Become More Challenging

2020 has been the hotbed of events which has made political and economic predictions more complicated in some countries. World’s tackling and reacting to the poverty, resulted from economic incapability and providing livelihood for majority of people on the earth because of the Coronavirus pandemic and social distancing, has essentially been hidden and unimaginable.

IRAN NEWS POLITICAL DESK

The capitalist countries which are run based on the liberalism school either politically or economically have shown more misery comparing to other countries in terms of tackling with poverty and unemployment. The U.S. which is proud to lead the world in having capitalist system has stuck in a disastrous condition that the lines of its hungry people are miles-long, and according to a saying, it is just the beginning.

A poll conducted by Reuters from 250 economists worldwide indicates that Coronavirus-related economic recession is deeper than previously predicted. One of the respondent was Ethan Harris, head of global economics research at BofA, who said, “In many ways the outlook for the global economy resembles an obstacle course. In the first step, the economy falls into a big hole, starting in China in Q1, most of the rest of the world in Q2 and extending into Q3 in some emerging markets.” He continues, “The second step is trying to reopen the economy without re-igniting the disease. The third step is dealing with the lagged impact of confidence on durable goods spending, the risks of a premature maxing out of fiscal and monetary stimulus, and a trade and tech war waiting in the wings.”

Almost three-quarters of economists, participating in the poll taken by Reuters, said the recovery would be either U-shaped, with a prolonged trough, or like a tick mark where the speed of the recovery is not as quick as the drop-off.

Only 15 respondents predicted a strong, V-shaped recovery. The others said it would be W-shaped, where a vigorous rebound results in another sharp slump, or L-shaped where the economy flatlines after the downturn.

The world economy is now forecast to shrink 3.2% this year, compared to a 2.0% contraction predicted in the April 23 Reuters poll and -1.2% forecast in an April 3 poll.

No economist polled expected growth in 2020, with forecasts in a -0.3% to -6.7% range. The outlook under a worst-case scenario was -6.0%, with those in a -3.0% to -15.0% range.

This prediction comes as early forecasts for global economic growth tended to range from 2.3% to 3.6% before the pandemic struck. Of course Reuters’ poll shows that the global economy was expected to grow 5.4% next year, according to the latest poll, faster than the 4.5% predicted last month.

Economies’ of India and China are expected to bounce back to grow sooner than other states and Japan with some “ifs” can enjoy comparative growth.

Iran, by balancing its liquidity deficit through selling state properties provided that the money is invested in productive and generative affairs and increasing the volumetric rate of gross domestic production (GDP, can experience below one percent growth rate. The way how to handle the oil sanctions and sales of crude and oil products is very crucial for Iran. Europe and especially Switzerland can take advantage of Iran’s intact market by restoring bilateral banking relation to appease concerns about more recession. And this all relies on the foreign policy in the government in the post-President Rouhani’s era.

 By: Hamid Reza Naghashian