How Coronavirus Affects Economy
Business Partner analyzed the latest forecasts by the Asian Development Bank (ADB) on how the global pandemic will influence the world economy, including the Georgian economy.
As noted by the ADB’s resident representative in Georgia, Shane Rosenthal, the region’s economic losses will be around 60 to 279 billion USD.
The ADB has analyzed three possible scenarios regarding the pandemic’s influence: light, moderate and worst-case scenario. Consequently, the forecast of global economic losses range from 77 billion USD to 347 billion USD. This means that the global GDP growth will decrease by 0.1%-0.4%, he noted, and added that the current uncertainties complicate making realistic forecasts.
“These indicators may expand further on both a national and global level. Many uncertainties accompany counter-epidemic measures. Therefore, it is very difficult to foresee final impact. The possible scenarios presented by ADB enable us to foresee the expected outcomes. According to our estimates, the region’s losses will range from 60 billion USD to 279 billion USD. With a more moderate outcome, we predict losses will hit 125 billion USD, that is 0.6% of GDP”, Rosenthal pointed out.
Declining economic activity and shrinking consumer demand primarily damage our poorer citizens. Therefore, it is a state priority to curb the virus’ spread, and make sure that the business sector and population stay resilient, prior to resuming economic activities, he said.
“Production has declined, and consumer activity has also fallen. We should realize that these circumstances mostly damage the poor in our society, who have almost no savings, who depend on everyday income and receive salaries in cash. The National Economy also greatly depends on the pandemic’s outcome. Amid volatile prices, the government has to curb the virus in a limited timeframe. Small independent states now prioritize slowing the pace of the spread of the virus, and to make sure that, prior to resuming economic activity, business companies and families stay resilient. They also prioritize resuming economic activity, both efficiently and productively”, Shane Rosenthal noted.
As compared with various countries, Georgia is showing good numbers. The main thing is that people should realize how important it is to stay at home and practice social distancing. This is a complex problem, and it cannot be resolved by only the government, law enforcement, or anybody else. All of us are participants in this situation, and we should work together to prevent the worst, he noted and added that Georgia is grappling with the pandemic much better than many other countries, and now it is important to minimize economic losses as much as possible.
“Amid the raging coronavirus, it is important that Georgia will cope with the challenges to minimize economic losses as much as possible. The government has succeeded in undertaking much more efficient measures than many other countries. The number of newly infected cases is growing at a low pace, however, resilience may be achieved in a complex way, and everybody staying at home is making a huge contribution to this endeavor. Those who abstain from friendly meetings and practice social distancing, demonstrate the family responsibility, care for each other, and wash their hands frequently, particularly, when going out, are contributing to the global victory over the pandemic. This is a situation where the problem cannot be resolved only by the government, law enforces or anybody else. All of us are in this situation, together, and we are trying to prevent the worst case scenario. I believe that Georgia is a genuinely foremost country, compared to many other countries. We have seen restrictions and testing of the arriving foreigners at an early stage. We have also seen emergency measures enforced about a week ago. It seems fair to say that Georgia stays much stronger in this regard, compared to many other countries. It is very important that Georgian citizens realize how important it is to stay at home, practice social distancing and realize that their contribution will ensure economic growth in the future,” Rosenthal noted, and added that the ADB will assist Georgia through adapting and strengthening ongoing projects.
As reported, the ADB has allocated 6.5 billion USD to support developing countries in fighting against the COVID-19 pandemic. The ADB’s resident representative has explained details of this package.
“This 6.5 billion USD package includes 3.6 billion USD for sovereign operations to finance counter-pandemic measures. of which 1.8 billion USD will be spent on strengthening current programs. The expansion of many programs will have an influence on economic problems. The ADB will also mobilize preferential resources of about 1 billion USD for current projects, and the unforeseen expenditures. 40 million USD will be spent on technical support in the form of fast grants. And this is only the first step. The bank is ready to allocate resources for counter-coronavirus operations. As noted earlier, this is the first package that we have introduced. For Georgia, the economic assistance profile is a priority. We plan to implement this project by adapting and empowering programs that are being prepared. In this way, we are able to assist the state budget to prevent an expansion of the fiscal deficit that is usually expected in similar situations. We successfully provided a similar urgent response in Georgia in 2008-2009 in order to help the country overcome the post-conflict situation. This could be an addition to already planned projects in fields such as the power sector, road construction, water resources management, urban development, and education. We have many packages underway. Last year, we confirmed the allocation of 600 million USD, and this program will continue”, Rosenthal said.
In this situation the Georgian government has taken a reasonable decision regarding the resumption of infrastructural projects, the ADB’s resident representative noted.
“I have discussed the relevant issues with our key partners, including the Minister for Regional Development and Infrastructure, and I was impressed by her determination to resume the majority of construction projects. This determination is genuinely admirable. This decision confirms that the authorities are paying close attention to workers employed in these projects, because employment resources will be maintained. They will stay completely coordinated with the government to protect all necessary local norms as part of counter-virus measures. At this stage, we are analyzing whether it will be possible to continue projects if the virus spreads further”, Rosenthal noted, and added that the ADB is capable of providing required assistance in various directions, including for funding small and medium businesses.
“We are focusing on other opportunities, too; for instance, regarding transport, communications, the power system, healthcare, production. We want to assist the private sector in restoring economic stability. We have a funding program that aims to empower commercial banks and grant credit to medium businesses. The assistance to the private sector will be announced as part of this program. I received the latest information today, and I was astonished at the pace of work”, Shane Rosenthal said.