Current World Financial Position
Assessing the ‘current’ financial position in one country, let alone worldwide, requires a daily even hourly update. The simple description as a result of the COVID-19 crisis is volatile. The stock market is fluctuating on an hourly basis, the housing market is tipped to drop significantly, the banks are writing off billions in anticipated defaults in the wake of the number of requests for deferments and much of the world’s workforce is still in lockdown and working from home where possible.
The COVID-19 pandemic sent shockwaves throughout the world. A health crisis which spread from China through other Asian nations to Europe, Australia, UK, USA, Russia and Eastern Europe and into South America and Africa, has left just about every country on the planet affected. What was initially a health crisis almost as quickly became an economic crisis of unprecedented proportions.
While some countries, notably Australia, New Zealand and the UK, were reasonably swift to implement significant economic relief packages, others were not so prompt. As a result, the world awaits to see how and what rates individual economies will bounce back as the coronavirus lockdowns are eased and business reopen.
Will the economy snap back? Will the recovery be a V-shaped, a narrow U-shaped or a very elongated U-shaped? The debate and discussion amongst expert analysts continues.
One thing is for sure, that is that the global economy will go into recession in 2020 and some countries are even looking at a possible depression. Whether it will rival the 1990s or The Great Depression of the 1930s – the world waits to see. The OECD has slashed its 2020 growth forecast from 2.9% to 1.5%. Analysts are predicting the global economy will contract by -3% which would be an even worse result than the 2008-09 global financial crisis.
It is expected that businesses won’t start to see more normal trading conditions until 2021 with some sectors dependent on international border re-openings, especially the airline industry.
In the US, with unemployment hitting around 22 million at the height of the crisis, many predict it will be a long road back.
With the 2020 Olympics postponed causing billion dollar losses, Japan was one of the first countries to officially signal it was in recession.
After recording a huge number of cases and deaths from coronavirus, the UK has kept lockdown measures in place for an extended period so it will be some time before the full economic impacts will be revealed. COVID-19 struck while the UK was in the BREXIT phase, so interesting times lay ahead to see how these combined impacts play out.
In Australia, it is hoped that the unprecedented relief and recovery packages totally around $200b from the Federal Government alone combined with the easing of restrictions well ahead of the initial schedule, will assist the economy to a swifter recovery. But border closures will seriously restrict the ability of the highly valued tourism and airline sectors to rebound in the short term. The major initiatives in the relief packages – JobKeeper and the coronavirus supplement in JobSeeker – are due to expire at the end of September 2020 and this is causing some concern. The Government is not giving any early indications of these programs being extended, but possibly more targeted solutions will be introduced for key industries.
As if one crisis was not enough to cope with, trade relations with China are under clouds in a number of countries, threatening the viability of several sectors. US-China trade relations were tenuous throughout 2019 and President Trump continues to flag possible further action.
China has place tariffs on Australian barley and bans on beef from some abattoirs and Australian trade officials are having difficulties establishing a dialogue to resolve the issues.
One thing is certain, the current world financial situation is in unprecedented times.