Coronavirus threatens global economy

• Nigeria, developing economies at high risk  

The current wave corona virus ravaging the world has been declared as the first phase of the devastating infection. The current infectious turbulence is widely considered the early stages of potential serial crises that will trail countries if the after the coronavirus has been eradicated. What will follow will be economic crisis. There is rising phobia that recovery may be except the big economic powers agree to cooperate to jointly handle the problems. The greater fear is that the economies will be struggling to recover from the shock and downed economy, they may not give attention to assisting developing economies.

The first phase of coronavirus devastation is identified as the health crisis which virtually all countries of the world are currently battling with most countries adopting lockdown to forestall spread. The battle with the health crisis is already having multiplier effects on the economy.

Thereafter, economic meltdown is expected to follow in the second phase. Coronavirus has apparently brought monumental crises countries of the world will have to contend with in years to come.

The consequences of coronavirus on the economy are already manifesting in the US. Over 10 million jobs were said to have been lost in two weeks in the US.

This was said to be the biggest economic casualty suffered by the US in the past two decades.

Many countries were identified to have confronted the coronavirus pandemic with heavy debt burden, and some as in the case of Nigeria, with associated additional debt servicing liability. Not only is Nigeria carrying additional debt burden, the federal government has new debt portfolio of $22.6 billon on the table of President Muhammadu Buhari to acquire. This was approved by the National Assembly before the coronavirus outbreak.

Italy has the highest public debt portfolio among the European Union members. The country which has suffered the highest casualties of coronavirus is the third highest indebted country in the world. There is the fear that Italy’s debt could increase astronomically as the country shoots up expenditure to contain covid-19. It has been declared: “Italy has the third largest economy in Europe, but it is only one of many European countries that will face a fiscal breakdown. “And this will happen at a time when Europe’s most dynamic economies, which often provide the money and guarantees for bailouts and support mechanisms, are themselves underwater.”

The economy of Germany which has not encountered recession in the past 10 years has also been threatened by the devastating consequences of coronavirus.

The economy of Nigeria, including economies developing countries, are at higher risks of depression.

However, the countries have recorded low infections as in Nigeria, India, Brazil, Indonesia, and others. Some have argued that “the likely reason is that those countries are less linked by trade and travel than the advanced world. These countries have also tested very few people, which is keeping their numbers artificially low.” Invariably, coronavirus cases in these countries may be underreported which makes the risk and uncertainty higher.

It was also noted that these countries “are cash-strapped, and the loss of tax revenue, combined with the need for large new subsidies, could easily tip them into their own versions of the Great Depression.”

The oil war between Russia and Saudi Arabia poses a serious threat to the economies of oil dependent counties. Except properly resolved, there is fear that price of crude oil in the international market may crash to as low as $10 per barrel. The price crash may cause devastating shocks and recovery may not be early enough to revamp the economies. There is global fear that oil price may crash to $10 per barrel and longer at that for some time.

This increases the risk of economic crisis in countries like Nigeria, Libya, Iran, Iraq, Kuwait, Syria or Venezuela, where oil is the mainstay of revenue for the government.

Debt burden and renewed superpowers tussle could pose serious threats to economic recovery in the post-coronavirus era.

The total global Gross Domestic Product (GDP) is put at $90 trillion which may be swallowed by global total debt profile of $260 trillion.

The United States (US) and China are still in contention over the outbreak of coronavirus from China which is devastating countries of the world. The US is holding China responsible for the coronavirus pandemic, but China is putting up strong defence and refusing to accept responsibility.

It was gathered that, the Group of Seven (G7) meeting on March was failed to issue a joint communique when the US declined to sign any statement that did not identify corona infection as “Wuhan virus”, the city in Mainland China where the virus broke out.

The US, China dispute threatens to precipitate breakdown of global cooperation. The bid economies that would provide aids to developing through multilateral diplomatic platforms and other international institutions would not have consensus in approval grants to developing countries. However, the consequence would be the return of Cold War, which may open the window for bilateral aids and foreign assistance from the two big economies.

Nigeria would total policy overhaul to position itself to benefit from whatever world order that may emerge in the post-coronavirus era, in addition to re-organizing the domestic economy to inject new stimulus that will boost production and manufacture in the economy to avert depression.