2020 Critical Financial Trends: Covidnomics Outlook2020/04/24
The global effects of the novel coronavirus that emerged in Wuhan in late 2019 have already far exceeded those of the previous SARS epidemic in terms of cases, deaths, and economic and financial impact. Worse, ever since the 2008-09 global financial crisis, the world's largest economies have all had loose monetary policies, causing the US stock market to exceed 1.5 times the country’s GDP in value. This pandemic marks the end of a decade of bull markets since 2010. As the market shattered one record after another, many had begun to fear a “black swan” event.
A bear market is natural, but time is required for the momentum to turn. There is no need to panic. What’s more disturbing this time around, however, is that for every day the disease is not brought under control, the probability of a global recession increases, and the expected duration becomes longer. A long-term crisis would fundamentally change our social habits and economic models, and even the international economic order.
Therefore, we must start creating momentum to rejuvenate the global economy now, even before the crisis subsides. We must coordinate our economic and financial policies to mitigate the fallout from the crisis. If we can do that, we will set the stage for a more dynamic recovery, when the time comes. The stakes are high, and there is no room for error.
Furthermore, monetary easing cannot be relied upon as a countermeasure against every economic shock. More comprehensive policies are needed. Thus, when the pandemic ebbs, we envision a new economic order, with policies to strengthen Taiwan’s competitive advantages and capacity for growth. Just as Taiwan prepared for the pandemic in advance, to international acclaim, it also needs a post-disaster revitalization policy to fuel the next round of its growth. Stimulus measures to support affected companies and individuals by themselves will be insufficient to alleviate the impact of the disaster and maintain social stability.
Part I: A Stricken Global Economy
Part II: The Aftermath
Dr. Hank C.C. Huang
Associate Research Fellow