Opinion

Inoculating economic growth against the coronavirus

Inoculating economic growth against the coronavirus

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Alarm over the coronavirus continues to spread as cases skyrocket in Far East Asia, Iran and Italy, creating an economic contagion that may prove difficult to contain as well.

To dampen panic, the International Monetary Fund’s managing director Kristalina Georgieva said at the recent Global Women’s Forum in Dubai that her economic crystal ball was being clouded by the coronavirus, but that she was still hoping for a “V shaped” recovery from China — a pronounced drop followed by a quick return to growth. At the G20 summit in Riyadh just a week later, she struck a tone that was clearly less optimistic.

Prior to the coronavirus, China was pegged to grow 6 percent, its slowest pace in nearly three decades.

Phase 1 of the US-China trade agreement lifted a cloud of uncertainty over protectionism, but that 18-month dispute seems like a blip on the screen today based on a sky-high level of uncertainty. Georgieva said China could slow to 5.6 percent, which is already forcing is Asian neighbors from South Korea to Southeast Asia to act.

The Philippines cut interest rates, Singapore announced a $4.5 billion emergency financial package, South Korea described the situation as an emergency that will need funding and the ZEW economic institute in Germany said virus fears are undermining sentiment and that was before Italy was gripped by a sharp rise of infections.

One should not overlook that it was Asia, not the US, that’s been the real engine of global growth the last two decades. The gross domestic product growth of China speaks wonders about the interconnectedness of today’s economy. Back during the sars virus in 2003, China was a $1.6 trillion economy. In 2020, it is a $14 trillion giant that vacuumed up products from all of Asia. That is clearly under threat, as oil, coal, copper and other commodities remain under pressure. But the coronavirus in an era of globalization poses a much bigger threat to global supply chains — where one manufacturing hub, say in South Korea or Japan, is highly dependent on supplies from China.

There is no shortage of analysis on how this is already affecting technology, pharmaceutical and aerospace companies, but at the G20 meeting the first bout of protectionist realism bubbled to the surface. France’s finance minister Bruno Le Maire went so far as to suggest that the West has become too dependent on China and its low-cost, highly productive manufacturers. It is not national pride or protectionism, claimed Le Maire, but industrial logic that needs to be applied to future policy.

I remember covering the final GATT trade agreement under the Uruguay round in 1988 before the creation of the World Trade Organization. It was France that posed the biggest challenge to a successful trade deal due to fears of US cultural colonialism from Hollywood and the threat to Europe’s highly subsidized farming sector. Neither proved true, but the language itself does not bode well for a global rules based system.

The coronavirus in an era of globalization poses a much bigger threat to global supply chains — where one manufacturing hub, say in South Korea or Japan, is highly dependent on supplies from China.

John Defterios

But it was Japan that signaled the clear and present danger of the coronavirus to the health of global commerce. China and Japan continue to have strained political relations, but the second and third largest economies are glued together as never before. Japan’s finance minister Taro Aso said it would be a mistake to remain complacent and those who have fiscal space to support growth should do so. Germany immediately comes to mind with its trade surplus and growing dependency on exports to China and the rest of Asia. Japan has its own issues to contend with after the economy collapsed in the fourth quarter by more than 6 percent and with the coronavirus in the mix, a recession seems inevitable.

This emergency policy call to action may give new life to what has been a dormant institutional structure at the G20. The group now represents more than 80 percent of GDP, with a quarter of the group from Asia. During the global financial crisis over a decade ago, then British Prime Minister Gordon Brown revamped the G20 to put forth a coordinated stimulus package that was the right move at the right time to resuscitate growth.

We heard murmurings of the same at the G20 in Riyadh with Saudi Arabia holding the rotating president this year.

“We will enhance global risk monitoring, including of the recent outbreak of COVID-19. We stand ready to take further action to address these risks,” according to the final communique of the conference.

Host finance minister Mohammed Al-Jaadan of the Kingdom said countries are ready to pull the policy trigger if needed.

“We all agreed that all countries and states will be ready to intervene as needed to face these risks and it’ll be a multilateral intervention including the WHO (World Health Organization) to monitor these risks and use relevant policies as needed,” said Al-Jadaan. 

Despite that outlook, the G20 said that global economic growth is expected to pick up “modestly” this year and next. At this stage of the coronavirus threat, I would not bank on it.

• John Defterios is CNN Business emerging markets editor and anchor based in Abu Dhabi. Twitter: @JDefteriosCNN

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view

Iran condemned over concealing coronavirus figures as 24 arrested over ‘rumors’

Workers disinfect subway trains against coronavirus in Tehran, Iran, in the early morning of Wednesday, Feb. 26, 2020. (AP)
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Updated 27 February 2020

Iran condemned over concealing coronavirus figures as 24 arrested over ‘rumors’

  • Iranian cyber police on Wednesday announced the arrests of 24 people accused of online rumor-mongering about the spread of a coronavirus outbreak
  • Schools, universities and cultural centers have been closed, sporting events canceled and teams of sanitary workers deployed to disinfect buses, trains and public spaces

TEHRAN: Iran “seems to be concealing information about the (coronavirus) epidemic,” Paris-based media watchdog Reporters Without Borders (RSF) on Wednesday said.
It condemned what it termed “Iran’s persecution of media outlets and journalists publishing independent information.”
Reza Moini, head of RSF’s Iran desk, said: “Respect for the public’s right to full, independent, diverse and quality news reporting... is the best way to protect the population and combat rumors. Withholding information can kill.”
President Hassan Rouhani, for his part, accused Iran’s arch foe the US of trying to use propaganda about the virus to instil “fear” against his country.
The Americans “themselves are struggling with coronavirus,” Rouhani said in a weekly cabinet meeting.
He added that “16,000 people have died of influenza there but they don’t talk about their own (dead).”
Rouhani’s remarks came a day after US Secretary of State Mike Pompeo accused Iran of concealing the full extent of the outbreak, saying “Tehran may have suppressed vital details.”
The virus has also infected Iranian officials.

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Deputy health minister Harirchi had coughed and repeatedly wiped sweat from his brow at a joint news conference Monday with government spokesman Ali Rabiei, who is now himself awaiting the results of a coronavirus test.
Harirchi stirred controversy at the time by denying a lawmaker’s claim that 50 people had died from the virus in Qom, the epicenter of Iran’s outbreak.
The latest health ministry figures show the virus has spread across the country.
There were 15 new cases in Qom, nine in Gilan in the north, four in the capital Tehran and three in Fars in southern Iran, it said.
Meanwhile, Iranian cyber police on Wednesday announced the arrests of 24 people accused of online rumor-mongering about the spread of a coronavirus outbreak that has claimed 19 lives in the country.
The Islamic republic is scrambling to contain COVID-19 a week after announcing the first two deaths in Qom, a center for Islamic studies that draws pilgrims and scholars from abroad.
Schools, universities and cultural centers have been closed, sporting events canceled and teams of sanitary workers deployed to disinfect buses, trains and public spaces.
International health experts have expressed concern about Iran’s handling of the outbreak — the deadliest for any country other than China.
Such worries mounted on Tuesday when the head of the taskforce combatting the virus, Deputy Health Minister Iraj Harirchi, admitted he himself had been infected.
But health ministry spokesman Kianoush Jahanpour said the situation was “improving,” even as he announced four more deaths and 44 new infections, including in six previously unaffected provinces.
The head of a newly established cyber police unit announced the arrest of 24 people accused of online rumor-mongering about the spread of the virus.

They were handed over to the judiciary, while 118 other Internet users were briefly detained and received warnings, Vahid Majid said, cited by semi-official news agency ISNA.
The arrests were carried out after the establishment of a special unit to “combat rumor-mongers regarding the ‘spread of coronavirus in the country’,” he was quoted as saying.
“The police are monitoring all the news published in the country’s cyberspace.”
Majid said the unit would take action over news, pictures or videos that “contain rumors or fake news meant to disturb the public and increase concern in society.”
The ministry added that Markazi, Kermanshah, Ardebil, Mazandaran and Semnan provinces each had one new case.
Newly hit regions included southwestern Khuzestan, which reported three infections.
The others were Lorestan in the west, Semnan in northern central Iran and Kohgiluyeh and Boyerahmad, as well as in the southern provinces of Hormozgan and Sistan and Baluchistan, which all had two cases each.
The health ministry’s spokesman, Jahanpour, appeared optimistic about the situation in the worst-hit province of Qom, south of Tehran.
“Every 24 hours, at least 10 percent of those hospitalized or suspect cases are discharged with good general health,” the official said.
But in Gilan, “things are slightly concerning,” he added, as it has had the second highest number of new cases, including people who had made trips to other provinces.
The health minister has repeatedly called on Iranians to refrain from traveling to other provinces, especially those infected like Gilan.
Iran is yet to quarantine any of the infected cities, including Qom, with authorities dismissing the method as outdated and ineffective.


UN officials appeal for Yemen funding amid pandemic

Updated 29 min 51 sec ago

UN officials appeal for Yemen funding amid pandemic

  • The United Nations says COVID-19 has likely already spread throughout most of Yemen
  • UN officials: What we don’t have is the money. We ask donors to pledge generously and pay pledges promptly

UNITED NATIONS, United States: Top officials from several UN agencies appealed Thursday for urgent international financial support in Yemen with coronavirus spreading in the war-torn country.
“We are increasingly alarmed about the situation in Yemen,” officials from the UN Humanitarian Affairs Department, UNICEF, the World Food Programme and the World Health Organization said in a joint statement.
“We are running out of time,” they said.
The United Nations says COVID-19 has likely already spread throughout most of Yemen, which was already immersed in the world’s worst humanitarian crisis because of a war that shows no sign of abating.
The UN officials said they currently have enough “skills, staff and capacity.”
“What we don’t have is the money. We ask donors to pledge generously and pay pledges promptly,” they said, noting that a donors conference has been organized for June 2 by Saudi Arabia and the United Nations.
Mark Lowcock, the under secretary-general for humanitarian affairs, said $2.4 billion needed to be raised by the end of the year for Yemen, including $180 million to combat the COVID-19 pandemic.
“Yemen is in desperate need of assistance,” Muhannad Hadi of the World Food Programme said, while UNICEF’s director, Henriette Fore, warned of a “major disaster.”
More than 12 million children in Yemen are in need of humanitarian aid, she said.
Before the pandemic, two million children lacked schools. Another five million have since been forced to quit school, she said.
Officially, 50 people have died from the new coronavirus in Yemen and infections have been reported in 10 of country’s 22 governorates.
“But testing and reporting remain limited and it is likely that most areas of the country are already impacted, if not all,” the United Nations reports.
Yemen has been engulfed in war since 2014 between Iranian-backed Houthi rebels, who control several regions including the capital Sanaa, and the government backed by a coalition led since 2015 by Saudi Arabia.