The Pandemic of the Covid-19, which began in China in December 2019, has made “social distancing” necessary not only in Korea but also around the world. As consumption decreases, industries such as travel, tourism, and other businesses and stores are closing down. In addition, the economic downturn is deepening due to a surge in salary cuts, unpaid leave, and layoffs at companies. Experts are concerned that the prolonged coronavirus could put the world in the worst economic crisis since the Great Depression.
In the United States, which has the largest number of confirmed cases in the world, the unemployment rate soared to 4.4 percent in March, and the economists are expecting the rate will be increased to 15% at the end of April. According to the Joongang-ilbo, in Britain claims for unemployment benefits have surged 10-fold in recent weeks. Also, in Spain, the number of the newly unemployed rose to 834,000 last month, while an increasing number citizens in France applied for unemployment benefits during the last two weeks of last month. According to Angel Guria, the secretary-general of OECD (Organization for Economic Cooperation and Development), the world is in a state of economic shock since they do not know how many people will be unemployed and how long it will take to recover from high levels of unemployment.
However, as the global economic slowdown becomes more serious, economic organizations and economists are debating about future economic conditions. Ben Bernanke, who was the U.S. Fed chairman during the 2008 economic crisis, said, "There could be a very steep and short recession next quarter. However, a very fast economic rebound will take place.” That is why COVID-19 is a natural disaster, not a financial crisis or a Great Depression. Some optimists, such as U.S. Treasury Secretary Steven Mnuchin and hedge fund Goldman Sachs, also expected that this time will be the same, just as the stock market recovered months after plunging on October 19, 1987 (Black Monday). They argue that the economy is like having been on vacation for a month or two.
▲Comparison of Business Survey Index (BSI) observation value by Economic Crisis (In order of mention : IMF/ Global financial crisis/ COVID-19 economic crisis)
On the other hand, New York University professor Nouriel Roubini, who accurately predicted the 2008 economic crisis, warns of a more serious Great Depression. "As the economic recession is in a serious state, it will fall vertically in the I-shaped shape, not in the V, U, or L," he claimed. Rubini diagnosed that the economic damage so far from COVID-19 has already exceeded the level of the 2008 economic crisis. Furthermore, he warned that failure to contain COVID-19 within this year could lead to a more serious economic downturn than during the Great Depression of 1929. Former U.S. Secretary of State Henry Kissinger, a great diplomat, told the Wall Street Journal (WSJ) on the 3rd (local time) that the world's economy and situation will never be the same as before even if the COVID-19 Pandemic ends.
In order to solve the current economic situation and prevent a bigger recession, governments are rushing to come up with policies such as lowering the benchmark interest rate. However, Nariman Berabesi, chief executive of the global economic analysis firm HIS market, said, "Currency policy is not a long-term solution, but an immediate crisis, so only fiscal policy can prevent and revive the real economy." In response, each country is trying to cope with the economic crisis through policies such as basic disaster income (UBI). The economic downturn caused by COVID- 19 is not just a matter of one country, but also a long-term problem of the world, and it will take a lot of effort to recover it.