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Will we return to a globalised world once this crisis is over?

Filed on March 31, 2020

It's not 2008 reprised, the situation is much worse.

It's not just economists who are assessing the impact of a slowdown or a recession, ordinary people are feeling it. Our dovetailed economies have been jolted. Linkages are snapping as we desperately try to stop the spread of Covid-19 and prevent people from getting infected. With supply chains broken, and demand suppressed it is not just the big industries and firms that are being brought to their knees, but life on the whole. The ongoing health crisis has mutated into an economic and social crisis, and could change the way we work, live, and behave. In the UAE, the government has already announced package worth billions to support people and businesses across sectors.

On Tuesday, Dubai government pledged support to Emirates airlines, which is the largest long haul carrier in the world, and a strong pillar of support to the emirate's aviation and tourism industry. It is the sign of the times, where aviation around the world is suffering and big companies need support of the governments to stay afloat. Aviation industry globally is expected to be hit hard and airlines could lose as much as $252 billion this year, as per IATA, the trade association of the world airlines. The Trump administration in the US, too, has announced a massive bailout package of $2 trillion for the economy, which includes support for the aviation industry. The United Nations trade and development agency, UNCTAD, estimates the outbreak could cost the world economy up to $2 trillion this year. That is quite significant and could wipe growth from all forecasts we have seen so far. There will be only a handful of countries that could emerge unscathed by the financial ramifications of this crisis, and certainly those are not the ones the world could depend on to push its economic engines. 

It's not 2008 reprised, the situation is much worse. But the only similarity that can be drawn from a decade ago is the role of China in reviving the world economy. It was China then, and it should be China now, too. The country appears to be on the first stage of recovery. It has managed to get its industries buzzing again in Wuhan, and is getting people back to work. There will be the dangers of relapsing of infections, but it appears that China is on track to stage the first recovery among emerging countries. The UN trade agency believes that China, along with India, could escape recession, which is likely to cast is its shadows on much of the larger world. But living in a globalised world as we do, much of the fate of even the strong emerging economies is linked with the global economy. So, China holds a larger responsibility here, and if it is to take on the leadership role, it must play its part in helping revive world growth. The credit-fuelled growth in China should continue, and Beijing should open its doors for larger imports. This could lead to wider current account deficits, but it would help other economies. The world is being badly bruised. Self-sufficiency and decoupling will not become the order of the day. We will return to a globalised world, and build strong linkages, and China surely should play a bigger role in that. It should open up, and become a true member of the global economy.


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