Key Takeaways: The View from Washington: Economic Impacts of the Pandemic and Policy Responses

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On April 8, AmCham hosted Matthew Goodman from CSIS who shared his insights on the global impact of COVID-19. Below are a few key takeaways from the webinar if you missed it. A quick poll was conducted to gauge audience' sentiment regarding countries' policy responses:

Global Economic Impacts

  • Worst economic setback since the Great Depression, unemployment in the US might spike to 12-15%
  • Agricultural, manufacturing, services, travel, entertainment, hospitality are among the most hit hard industries
  • Supply chain being seriously disrupted, China being the center of global supply chain still suffer component shortages, transportation bottleneck as companies are yet fully operational
  • Corporate bond market under tremendous stress in the US, SMEs face cash flow shortages, significant capital outflow from emerging market

Policy Responses

  • Most G20 countries have collectively spent USD 5 trillion on economic stimulus
  • US’ 3rd relief package which is worth USD 2.2 trillion (10% of US GDP) is massive but may not be sufficient enough for the economy will likely lose more than USD 5 trillion in GDP
  • US Congress in talks to include supplemental funding to SMEs and 4th relief package 
  • The Federal Reserve responded quickly by cutting interest rates, implementing liquidity SWAP with other central banks around the world
  • Some countries impose export control on medical equipment and food supply while domestic production mandate is being implemented in the US
  • Multilateral organizations including the IMF will give out more bail outs to emerging markets; calls for bilateral debt relief
  • China’s stimulus package is relatively small as it accounts for 2% of its GDP
  • International cooperation of policy responses is important

The Perfect Storm: Lack of International Cooperation to Combat Global Challenges

  • While countries have a shared interest to fight this multi-faceted crisis, there is division among G20, G7 members.
  • Lack of trust between countries and domestic political pressure within countries
  • Divergence being reinforced between the US and China as both countries are reluctant to cooperate 

Longer Term Implications

  • Stress of US-China bilateral trade imbalance, tech related structural issues remain  
  • Health surveillance and data governance
  • Trend toward shortening, regionalization and diversification of supply chain, making it more resilient; drive some production onshore, i.e. The Defense Production Act in the US
  • Increase investment opportunity in clean energy

Information about our speakers:

  • Matthew Goodman, Senior Vice President; Simon Chair in Political Economy and Senior Adviser for Asian Economics, CSIS
  • Tara Joseph, President, AmCham HK (Moderator)

 

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