• About Us
  • Who Are We
  • Work With Us
Thursday, July 10, 2025
No Result
View All Result
The Globe Post
39 °f
New York
44 ° Fri
46 ° Sat
40 ° Sun
41 ° Mon
No Result
View All Result
The Globe Post
No Result
View All Result
Home Opinion

Coronavirus Bites the World Economy: A Recession in the Making

Raja Junankar by Raja Junankar
03/18/20
in Opinion
Peter Tuchman reacts as he works the floor during the opening bell at the New York Stock Exchange on March 9

The stock markets have taken major blows as market turbulence continues over the coronavirus pandemic. Photo: Timothy A. Clary, AFP

Share on FacebookShare on Twitter

The coronavirus has hit the world economy at a time when many economies were slowly going into recession. The tariff war between China and the United States had already led to a disruption of global trade and was causing an economic slow-down for many countries.

The world economy is now teetering on a knife’s edge: the Chinese economy has slowed down, the Indian economy has already slowed down with the antics of the Modi government, and Italy, like many other European countries, is on lockdown and likely to plunge into a recession.

Share markets have gone through some of the worst collapses since the 2008 Great Recession. Tourism has been hit significantly, and airlines are either at risk of going bankrupt or cutting back significantly. What are the likely outcomes? What is to be done?

In the short term, the world will witness a recession with increasing unemployment and long-term unemployment. If governments introduce stimulus policies, the economies should begin to stabilize in the medium term, while in the longer term, they should come out of recession.

Supply and Demand Shocks

The world is facing its worst crisis since the Great Recession of 2008-2009. The World Health Organization has declared coronavirus a pandemic. Panic has set in many countries, with long queues at shopping malls and pharmacies for face masks and hand sanitizers.

As China is a major player in the global economy, both as an importer and exporter, a recession there has hit many economies that not only sell products to the country but also buy intermediate products that enter the supply chain for industrial production in the U.S., Europe, and Pacific nations like Australia. Global uncertainty has escalated and is strangling business investment in real capital goods.

BREAKING: Dow Jones plunges at opening, temporarily erasing yesterday's gains. Follow for the latest: https://t.co/cQz4fqzh0b pic.twitter.com/LQ0eofPCTU

— ABC News (@ABC) March 18, 2020

World tourism has been drastically reduced with airlines and the cruise industry suffering. Insurance companies and banks may come under stress and might go into bankruptcies as the virus spreads. A financial crisis may ensue.

The world is facing a different crisis than the financial crisis that sparked the Global Financial Crisis some twelve years ago. At present, the world faces both a supply shock and a demand shock. Global production is being disrupted, and the demand for goods and services is declining rapidly as employment falls and unemployment jumps up.

Descent Into Recession

All the evidence available so far points to many countries having begun a descent into a recession. It is, however, unclear how long this recession would last and whether the recovery would be rapid or long drawn out.

As it happens, many of the global economies had already been slowing down with monetary authorities lowering interest rates to historic lows. In some European countries, nominal interest rates were even negative. Hence, the usual response of lowering interest rates is unlikely to prevent the recession. The U.S., U.K., and Australia have all cut interest rates, but this is not likely to stimulate investment expenditures by firms as there is too much uncertainty.

To tackle the coronavirus crisis, a concerted global response is needed. Clearly, if all major players decided to stimulate their economies at the same time, we would be able to prevent the recession from being a deep and lasting one. But this requires not simply lowering interest rates and “quantitative easing” but significant fiscal stimulus packages being introduced simultaneously.

Easing the Pain

To ease the pain of this recession, fiscal policies need to be introduced to stimulate the economy immediately. Ideally, there would be a big stimulus package that increases the post-tax income of low-income households and the welfare benefits of unemployed people, old age pensioners, and the sick.

This means that income taxes for low-income groups should be lowered, unemployment benefits should be increased, and cash payment should be provided immediately to all low-income households (including the unemployed).

Passengers being checked as they disembark from a plane carrying French citizens flown out of the coronavirus hot-zone in Wuhan
Passengers being checked as they disembark from a plane carrying French citizens flown out of the coronavirus hot-zone in Wuhan. Photo: Oliver Fabre, AFP

Given the spread of the virus, governments must spend on public health facilities, support workers who are forced to quarantine themselves, and provide income support to those who are forced to work part-time or become unemployed.

To avoid the recession continuing for an extended period, public investment in infrastructure projects – such as schools, hospitals, housing for the homeless, and aged care homes – must be increased.

This time it is different. This global crisis is not triggered by a financial breakdown but by a collapse of trade and travel due to a pandemic. It needs a concerted global response by governments. If we manage it well, the recession may be short-lived.

Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the editorial position of The Globe Post.
ShareTweet
Raja Junankar

Raja Junankar

Adjunct Professor, Industrial Relations Research Centre, Business School, UNSW Canberra. Emeritus Professor, Western Sydney University. Research Fellow IZA, Bonn, Germany. Executive Editor, Economic and Labour Relations Review

Related Posts

Donald Trump
Opinion

Fact vs. Fiction: The Trump Administration’s Dubious War on Reverse Discrimination

by Kevin Cokley
June 18, 2025
A Black Lives Matter mural in New York City.
Opinion

Fuhgeddaboudit! America’s Erasure of History

by Stephen J. Lyons
April 2, 2025
Smoke from the Palisades Fire in Pacific Palisades, California, from Santa Monica, California, on January 7
National

Los Angeles Fire Deaths at 10 as National Guard Called In

by Staff Writer with AFP
January 10, 2025
President Donald Trump and Ukrainian President Volodymyr Zelensky shake hands during a meeting in New York on September 25, 2019
World

Zelensky Says ‘Unpredictable’ Trump Could Help End War

by Staff Writer with AFP
January 2, 2025
President Donald Trump in the Brady Briefing Room of the White House.
National

Trump Wishes ‘Merry Christmas’ to ‘Left Lunatics’ in Frenzy of Social Posts

by Staff Writer with AFP
December 27, 2024
US President Donald Trump inspects border wall prototypes
National

Trump Confirms Plan to Use Military for Mass Deportation

by Staff Writer with AFP
November 18, 2024
Next Post
Men wear face masks as a preventive measure against the spread of the new COVID-19 coronavirus in Ouagadougou, as they drive with motorcycles in the street on March 16, 2020. Photo: AFP

First Virus Death in Sub-Saharan Africa as WHO Warns 'Prepare for Worst'

Cuban embassy in the U.S.

Virus-Hit British Cruise Ship Docks in Cuba

Recommended

Women in Afghanistan wearing a blue burqa

ICC Seeks Arrest of Taliban Leaders Over Persecution of Women

July 9, 2025
Kenya, Nairobi, 2024-07-16. Protesters in the streets

Nairobi Tense as Kenya Marks Democracy Uprising

July 7, 2025
President Donald Trump

Trump Wins ‘Phenomenal’ Victory as Congress Passes Flagship Bill

July 4, 2025
University students march in protest towards the Istanbul Municipality in Sarachane as they demonstrate against the arrest of Istanbul Mayor Ekrem Imamoglu in Istanbul, Turkey, on March 21, 2025.

‘Remember Charlie Hebdo!’ Protesters Seethe at Istanbul Magazine

July 2, 2025
US President Donald Trump

US Senate Edges Towards Vote on Trump’s Divisive Spending Bill

June 30, 2025
Protests in Hong Kong in 2019.

Hong Kong’s Dragnet Widens 5 Years After National Security Law

June 27, 2025

Opinion

Donald Trump

Fact vs. Fiction: The Trump Administration’s Dubious War on Reverse Discrimination

June 18, 2025
Tens of thousands of protestors shut down Fifth Avenue in Manhattan on Saturday, April 5, 2025, protesting the Trump administration's abuse of the separation of federal powers as well as the deep cuts to governmental services overseen by presidential advisor Elon Musk.

Civil Society Is Holding the Line. Will Washington Notice?

June 17, 2025
A Black Lives Matter mural in New York City.

Fuhgeddaboudit! America’s Erasure of History

April 2, 2025
Bust of Deputy Rubens Paiva in the Chamber of Deputies

Democratic Brazilians Are Still Here

March 18, 2025
A woman from Guatemala

Dispatch From Central America

January 28, 2025
US President Donald Trump

Dear Trump Supporters: Is This the America You Wanted?

January 28, 2025
Facebook Twitter

Newsletter

Do you like our reporting?
SUBSCRIBE

About Us

The Globe Post

The Globe Post is part of Globe Post Media, a U.S. digital news organization that is publishing the world's best targeted news sites.

submit oped

© 2018 The Globe Post

No Result
View All Result
  • National
  • World
  • Business
  • Interviews
  • Lifestyle
  • Democracy at Risk
    • Media Freedom
  • Opinion
    • Editorials
    • Columns
    • Book Reviews
    • Stage
  • Submit Op-ed

© 2018 The Globe Post