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COVID-19: a challenge for economic growth

14.10.2020

On October 7, the Economic Research Institute held the International Conference COVID-19: a challenge for economic growth.

Experts from different countries discussed the world's economies recovery, the prospects for growth of foreign investment at the local level, and political strategies for economic stimulus against the background of the coronacrisis.

The event was opened by Nurbek Yergeshbayev, the Head of the Secretariat of the National Contact Point (NCP) of the OECD, Adviser to the Chairman of the Management Board of Economic Research Institute JSC:

"The COVID-19 outbreak has had extensive, drastic consequences around the world. Economic shocks are making adjustments to the long term. Recovery will largely depend on the ability to respond effectively to the shocks caused by the pandemic.

Systemic shocks, namely the COVID-19 pandemic, require an immediate response, but should also encourage to systematically review of planning processes. The Economic Research Institute aims to provide research support for the implementation of the country's economic strategy, analyze the state of the economy and forecast its future development, promote sustainable economic growth, improve the level and life quality of people". 

The head of the OECD NCP Secretariat emphasized the role of the Economic Research Institute in the development of major government programs and draft laws, as well as in assessing the economic situation in the country.  According to him, ERI experts pay special attention to monitoring and reviewing strategic and program documents, as well as applied research in the field of economics based on the use of modern economic and mathematical models.

Thus, according to the analytical data of Kuanysh Beissengazin, the Director of the Center for Macroeconomic Research and Forecasting of ERI, the world economy is in for an unprecedented recession. In his forecasts, a well-known economist cited the following indicators:
  • World economy contraction by 4.9% in 2020
  • A significant increase in unemployment in almost all countries of the world - 8.4%.
  • 20% decline in global trade in 2020
  • Growth of global public debt by 19% of GDP in 2020.
To respond to the consequences of the pandemic, the Government of the Republic of Kazakhstan adopted two anti-crisis measures and developed a Comprehensive Economic Growth Recovery Plan.  A state of emergency was declared twice. The measures taken led to positive results: in August-September, the number of people infected with coronavirus significantly decreased.

USD 14.8 bln. was allocated for coordinated efforts to suppress the pandemic. "Tax holidays and deferrals, increased spending on anti-crisis management measures and reduced budget revenues are likely to lead to a sharp increase in the budget deficit in 2020," KuanyshBeissengazin noted.

According to the expert's forecasts, the budget policy is expected to be expansionary in 2020.

"Oil, gas, cotton, gold and metals have become the main sources of hard currency in independent Central Asia. In particular, three countries, Kazakhstan, Turkmenistan and Uzbekistan, have formed their development paths around a combination of these resources, especially oil and gas", Paolo Sorbello said, the member of the Executive Committee the Caucasus and Central Asia Observatory (OACC), "It is finally time for a green turn".

World economy

In general, the conference participants noted that the world economy was severely affected by the current crisis. However, the pandemic highlighted the solidarity that already exists among the states.

Overall, the global economic recovery will be slow, Claude Abitbol believes, the Professor at the Sorbonne University in Paris.

According to him, OECD and a number of other organizations are considering two possible scenarios:

"The first scenario is based on the hypothesis of a second wave of infection, accompanied by new measures and restrictions by the end of 2020. Global economic output is expected to fall by 7.6% this year. The unemployment rate in the OECD countries will almost double, up to 10%. According to the second scenario, the second wave of the epidemic will be avoided, then economic activity at the global level will fall by 6% in 2020, and the unemployment rate in the OECD countries will reach 9.2%".

Claude Abitbol said that, according to IMF, US GDP will fall by 8% against the 5.9% forecast in April 2020. Economic projections in other countries are even more alarming: -10.2% for the European Union and the United Kingdom; -9.4% in Latin America and the Caribbean; -8% in South Africa, -5.8% in Japan, -4.7% in the Middle East and Central Asia; -4.5% in India.

According to the Professor, the first priority of governments is to overcome the emergency situation in the field of health and economy. 

"France has always been the main and most active player among the EU members, the first to recognize their independence and one of the first to develop a strategic partnership with the countries of Central Asia.  French companies are particularly active in the international energy sector: in joint production with companies from Kazakhstan and Turkmenistan;  in the field of hydraulics with Tajikistan and Uzbekistan - wastewater treatment," Mr. Abitbol said during the conference, "...However, France is now one of the four European countries most severely affected by the health crisis, with a possible recession and a drop in GDP of more than 14%!" The consequences of the pandemic have particularly affected passenger transport, tourism and cultural activities. There is a high level of debt of French companies and a lack of solvency.

Mobilizing fiscal policy will be crucial to support the recovery, economists say.

Kazakhstan and France have been bound by the Strategic Partnership Agreement since June 11, 2008. 

"The implementation of the European Union strategy and France's actions in Central Asia should and can be strengthened", the Professor believes.

Germany: "the decline in manufacturing, still significant, the service sector has been particularly affected by the lockdown", Lars Handrich said, the Managing Director of DIW Econ, the Consulting Company at the German Institute for Economic Research (DIW Berlin).

At the same time, according to him, the government expects that in the 4th quarter of this year the economy will again achieve some moderate growth.

"German citizens who lost their jobs can apply to the Employment Office, and then the Federal Office will compensate up to 85% of the monthly salary for a short period. About 4.7 million people switched to a shortened working day in the 2nd quarter of this year", the invited speaker stated.

The expected decline in German GDP is - -6.7% in 2020. The overall economic decline is 4.5% per year.

Well-known analyst and Daily Telegraph columnist, Pieter Cleppe is concerned about the situation of EU countries in connection with fiscal policies aimed at supporting taxpayers.

"Incentive fiscal policy leads to an increase in output in most cases. But, printing more money does not guarantee stability, but on the contrary, it can lead to currency depreciation," an international expert said, "as a result of monetary activity, devaluation occurs. If interest rates rise in the Eurozone in the future, there will be problems not only with borrowing, but also with refinancing debt obligations".

According to him, currently some European countries are close to default.

According to some experts, falling indices in the currency markets are not the main problem of mankind.

"Climate change is the biggest threat to the inhabitants of the Earth. And it is associated with population growth. The number of people around the world - 7.8 billion people. This figure will increase to 10 billion people in 2050, which will lead to an increase in energy demand by about 50% compared to today. This dynamic is expected mainly in developing countries," Jean-Pierre Cordier said, the President of Sociétéd’Encouragement pour l’IndustrieNationale International Commission.

It is possible to prevent global warming in the context of demographic growth with the help of renewable energy sources (RES). Their number is growing, but so far even this growth is not enough to offset the growing consumption of fossil fuels.

Emissions from fossil fuels account for about 80% of all CO2 emissions. Oceans absorb 23%, land - 29%, over 40% of CO2 enters the atmosphere. Between 1875 and 2019, the world injected 2,300 gigatons of carbon dioxide into the atmosphere, causing global temperatures to rise by 1°C.

The increase in the average air temperature on our planet may exceed the threshold of 1.5 degrees Celsius by 2040 compared to the level before the beginning of the Industrial Era. According to experts, this could lead to an increase in extreme weather events - droughts, forest fires and floods, as well as food shortages that will affect the fate of hundreds of millions of people around the world.

"Citizens and consumers can help curb the pace of global warming" Mr. Cordier believes.

The choice of means of transport in the city has a significant impact on the level of greenhouse gas emissions. Walking, riding a bike is an environmentally friendly alternative to the car.

And most importantly, it is necessary to spread knowledge about climate change and what it brings with it, as widely as possible.

As a result of the online conference, the speakers thanked the Institute for Economic Research for organizing this event and emphasized the effectiveness of discussing economic measures that will accelerate the processes of economic recovery.




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Saved: 23.10.2020





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