We are not out of the woods: Krugman on global economies

Nobel-prize winning economist Paul Krugman said that the world is not out of the woods, but that global trade volumes were doing better than expected.

“The world economic outlook for the next six months plus is going to be dominated by the problem of the coronavirus. So, we basically are just not out of the woods at all. In some ways it doesn’t depend that much on what the policy responses are,” Krugman said during a virtual session held on the second day of the Abu Dhabi International Petroleum Exhibition Conference.

Krugman while talking about the hazards of contact-intensive sectors, said it’s a “terrible time” to be a restaurant owner and those running similar businesses.

“The contact-intensive sectors of the economy remain depressed in the face of the pandemic. Even if the government says ‘eat, drink, be merry, go out and do your business’, people won’t go if they are afraid of infection. So, we have a troubled economic outlook for a good part of the world, which is not a good thing,” said the winner of 2008 Nobel Memorial Prize in Economic Sciences.

Last month, the International Monetary Fund upgraded its economic outlook for 2020 but warned of a slower 2021. The global economy is projected to contract by 4.4 per cent this year.

However, Krugman stressed that the global trade is doing “slightly better” than expected.

Making a comparison with the financial crisis of 2008-09, Krugman said: “Global trade has held up very well. We have severe restrictions on mobility of people but not really on mobility of goods. As a result, global trade volume is almost back to pre-pandemic levels, just some 8 months into the crisis. Whereas it took almost 3 years to have that kind of recovery in global trade after the 2008-09 financial crisis. So, we are looking at a situation where globalisation is one of the things that is surprisingly in good shape considering everything that has happened.”

Last month, economists from the World Trade Organisation forecasted a 9.2-per cent decline in the volume of world merchandise trade for 2020, followed by a 7.2-per cent rise in 2021.

ashwani@khaleejtimes.com