Global Health Crisis Needs Multilateral Response

Monetary policy alone cannot stop a coronavirus-induced recession. A coordinated public policy focussed on health is needed

- D Ravi Kanth

Back in September, the UNCTAD’s flagship publication, the Trade and Development Report, warned that the economic imbalances, social inequities and financial fragilities left unaddressed since the 2008 financial crisis were storing up serious problems for the global economy. With advanced economies stuck in secular stagnation, weakening global demand and debt levels at historic highs in both the public and private sectors and across countries at all levels of development, there was an urgent need for coordinated policy action. It hasn’t happened.

A looming trade war, tensions around the transfer of technology and currency clashes seemed the most likely triggers of a downturn. It turned out that something a good deal scarier was brewing in a food market in central China. With the economic contagion from the health shock now spreading faster than the virus itself, a global recession is no longer a matter of speculation but rather a clear and present danger.

The UNCTAD last week warned that the global economy was, indeed, heading for a recession. However, it went on to suggest that a combination of asset price deflation, sinking aggregate demand, heightened debt distress and a worsening income distribution could trigger a more vicious downward spiral.