A long, dark tunnel

The World Bank's warning on Tuesday that the coronavirus pandemic could push up to 60 million people into extreme poverty, erasing "all the progress made in poverty alleviation in the past three years", is disturbing but not altogether difficult to understand. Its president, David Malpass, also explained that the global economy was now expected to shrink by about 5.5 percent this year, confirming a steep recession which will take the world a long time to claw its way out of, especially since the chances of finding a vaccine for the coronavirus are rather slim; at least in the 12-18 months' period. The Bank should know about the numbers. It is offering $160 billion in grants and low-interest loans to poorer countries to face the worst of the ongoing crisis and already about 100 countries, home to roughly 70 percent of the world's population, have been extended emergency finance. Yet much more will be needed, and quite soon, which is why it is going to be important to convince commercial lenders to provide debt relief to poor countries immediately. The World Bank has been helping in this particular department as well, working with the IMF (International Monetary Fund) a couple of months ago on a scheme to allow poorer countries to request relief on debt owed to G20 members until the end of the year.
A World Economic Forum report, which also came out on Tuesday, didn't do much to lift the spirits either as it warned that a prolonged global slump and a spike in the number of bankruptcies caused by the coronavirus were weighing very heavily on the minds of company executives as countries relaxed their lockdowns and tried to trigger economic activity and employment. All the debt created because of the recent wave of relief packages around the world will no doubt put pressure on governments and corporate finance and impact growth for years. Most governments initially bet that the quarantine, relief package, etc., were going to be short-term things and the virus would have been dealt with, in one way or another, over the initial two weeks of the lockdown. Once it became clear that nothing of the sort was happening, and not all countries had the financial depth to provide repeated stimulus packages, fears of companies as well as governments collapsing without immediate aid began to grow, and quite understandably so.
Now hardly anybody talks of the prospect of a V-shaped recovery anymore, not even too many people in the US administration, which has been playing down the impact of the virus, in continued defiance of all sorts of statistics, since the very beginning. The US Federal Reserve (American central bank) Chairman Jerome Powell, perhaps the only senior US official to admit that the American economy "might already be in recession" as far back as April, initially believed that it would not take too long for the global economy to get back on its feet once the virus was gone. This wasn't a systemic crisis within the financial system, after all, but rather an exogenous shock that came when the economy was in the 11th year of an epic bull run. The lockdown, Powell first believed, amounted to putting things on hold till it was alright to work and grow again, which is why the Fed initially counted itself among advocates of the V-shaped recovery argument. But the threat never really went away. Sure, many countries are relaxing their lockdowns but initial data, from countries in Europe that opened up sooner, is not very encouraging at all. That is why the recovery argument is now restricted to the White House, mostly just the US president, and Powell and his friends do not see bright days ahead; at least not in the near future.
Clearly, in light of all the evidence, things will just not start getting back on track till the coronavirus is defeated in the laboratory. Countries can open up in whatever way they like, impose the strictest SOPs (Standard Operating Procedures) that they are able to, yet the virus will continue to spread because of the simple facts that people will come into contact with one another and it spreads exponentially. The longer we are without a cure, the more the chances of a global economic slump, mass unemployment and poverty, even social agitation on an unprecedented scale. This crisis has exposed the fragility of the system that the modern world was built on. And a lot more safeguards will have to be put in place once, or if, the world truly comes out of it. For now, as things stand, there's a long, dark tunnel ahead and there's no light at the end of it yet.