Coronavirus can cause $ 346 billion loss in global GDP

Coronavirus can cause $ 346 billion loss in global GDP
16 April 2020

The restrictions imposed worldwide due to the coronavirus outbreak cause disruptions in production. Governments across the globe announced support packages to support producers and the size of these packages is equivalent to 11 percent of GDP in the US, 1.9 percent in Turkey and 1.2 percent in China.

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ISTANBUL (TR) - The number of people with coronavirus worldwide has reached 2 million and the total number of dead is 137 thousand. While the G20 countries, which cover the 20 largest economies in the world, constitute 81 percent of the total cases, the measures taken in these countries to spread the pandemic caused great disruption in production. The gross domestic product (GDP) figures on a country basis declined due to production disruptions, while growth expectations also fell. Stating that the outbreak will cause a loss of 76 billion dollars in the domestic products of countries globally at the end of April, Aziz Hatipağaoğlu said that if the effects of the pandemic on production increase, it may cause greater losses for the global economy. Hatipağaoğlu, who also evaluated the financial support packages announced by the countries, said that the packages announced while comparing between countries are in direct proportion with the extent of the pandemic and that GDP should be taken into consideration.

“Loss could reach $ 346 billion at the end of August”

Stating that the global production economy will be seriously affected by the continued prohibition of the pandemic and the sharp decline in domestic demand, Aziz Hatipağaoğlu said, “In-depth research and modeling are being conducted on the impact of coronavirus on total production of goods and services in a year on a global basis. While the damage caused by the pandemic in global GDP is expected to reach 76 billion dollars at the end of this month, if the restrictions applied due to the pandemic measures continue, there will be a loss of 155 billion dollars at the end of May and 346 billion dollars at the end of August. It is vital to prevent the outbreak as soon as possible, to prevent this damage and to prevent the economies of the country from causing other problems.”

“The scope of the support packages is important, not the size”

Stating that there had been many debates in terms of qualification, Aziz Hatipağaoğlu said,”Turkey has announced a total of 100 billion TL of a package of measures, including the doubling of the fiscal measures and credit guarantee fund. This package is equivalent to 1.9 percent of GDP in Turkey. It is unrealistic to compare the adequacy of the announced package over the total amount. For example, although China announced a $ 368 billion support package, this figure corresponds to 1.2 percent of China's GDP. The ratio of support packages announced to Russia and Italy to GDP is 1.4 percent. The USA, on the other hand, announced a support package of 2.3 trillion dollars corresponding to 11 percent of GDP. However, it should not be forgotten that the package announced by the USA is very comprehensive. So much so that this package includes international aid of $ 49.9 billion.”

Stating that the support packages announced are directly proportional to the damage caused by the pandemic, Aziz Hatipağaoğlu concluded: “Each country prepares the support packages it prepares according to the level of coronavirus exposure. The size of the packages should not be seen as a public gift to governments. For example, the economic package announced in South Korea, where the pandemic was managed very well, was smaller than many countries and corresponded to 0.8 percent of GDP. In such periods, strong government intervention is of great significance for the low-income groups, especially those who live with their labor, as well as the enterprises can remain standing and sound.”

“Growth expectations have been replaced by bearish forecasts”

Stating that the situation that affected the economies most during the pandemic period was uncertainty, Aziz Hatipağaoğlu said, “The main reason for these sharp declines in the economy is not knowing when the outbreak will end and when production will continue. For this reason, the estimations made include the worst scenarios due to the uncertainty in the reports and simulations announced. For example, the IMF described the crisis in the global economy due to the coronavirus pandemic as the biggest crisis since the Great Depression. While it is predicted that the global GDP will grow by 3.3 percent in January, it has been announced that there will be a 3 percent decrease in the global economy after the pandemic. In every country affected by the pandemic, the expectations for production, employment and growth change completely, and estimates are made about the decline to be experienced.”

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