Post Publication Independent Review of

“Alternative scenarios for the impact of the COVID-19 pandemic on economic activity in the euro area”

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Part XXIX. Post Publication Independent Review of “Alternative scenarios for the impact of the COVID-19 pandemic on economic activity in the euro area”

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Post Publication Independent Review of

Alternative scenarios for the impact of the COVID-19 pandemic on economic activity in the euro area

Prepared by Niccolò Battistini and Grigor Stoevsky

HomeResearch & PublicationsEconomic BulletinFocus1 May 2020

Review Comments:

1. Quote “The outbreak of the COVID-19 pandemic has dramatically affected global economic activity since early 2020. The rapid spread of the novel coronavirus (COVID-19) has required drastic measures to be taken, ranging from social distancing and the banning of public events to shutdowns, lockdowns and restrictions on numerous activities. The severity of these measures has begun to ease in some jurisdictions, as authorities are proceeding to gradually lift them and reopen certain sectors of the economies. “ End of Quote

This is true of every Nation.

2. Quote “Nevertheless, there could still be a prolonged period of social distancing and other containment measures in force for some time. These containment measures have weighed on supply and – together with increased uncertainty and self-isolation by individuals due to the rapid spread of the disease – have also induced households and firms to retrench their spending, thereby reducing aggregate demand. Widespread closures of firms have triggered a marked deterioration in employment conditions, an increase in firms’ liquidity needs, and pronounced financial market disruptions. Despite the shortage of timely hard data, it is already clear that there has been a decline in economic activity of an unprecedented magnitude.” End of Quote.

The Covid-19 may be ushering in a scenario where there may be a redistribution of assets, with marked changes in Investment & Holding Patterns, Take-Overs & Company Mergers & Strategic Partnerships. Further, the lasting effect of the COVID-19 on the would be the memories of the vast majority who underwent difficulty, on Corporate Social Responsibility (CSR). Of course, the opportunists may make hay while the sun shines, but the leaning of the vast majority of the people may possibly shift towards those Corporates who stood with them during their time of difficulty, and this can have a possibility of waxing/waning of any brand based on their CSR fulfilment (marginal/average/exceptional) accompanied by social influencing over marketing campaigns. Everything can have a price in this world, but the sentiments of a vast majority that suffered during COVID-19 may have to be given due consideration, for the manufacturers cannot play multifaceted roles as consumers/customers too, by totally ignoring mindsets.

3. Quote “There are high uncertainties surrounding the developments of the pandemic, the need for and effectiveness of containment measures, and the possible emergence of medical treatments and solutions. These uncertainties can be illustrated through a scenario analysis, based on broad narratives for the aforementioned factors and their economic impact.” End of Quote.

It is time that we accept that uncertainties and the possible role of these uncertainties in reshaping the economy post COVID-19.

For instance consider the difference in situation with reference to Net Neutrality concerns that Facebook faced over its “Free Basics” program unveiled a few years ago, compared to the investment/partnership in Reliance Jio that happened now, which is projected by news articles as having the potential to turn Reliance Jio debt free in a few months ( ). Net Neutrality may also be a concern now, but priorities may have to be addressed and perhaps strategic trade-offs & drastic/non-drastic policy changes also may have come to stay, ushering in volatility.

4. Quote “The scenarios vary according to a number of factors, namely the duration of the strict lockdown measures and their impact on sectoral economic activity, the economic effects of protracted containment measures during a post-lockdown transition period, the behavioural responses by economic agents to minimise economic disruptions, and the longer-lasting effects for economic activity once all containment measures have been lifted. This scenario analysis for the euro area is based on the same broad narratives for the global economy (and thus for the euro area foreign demand), while it abstracts from further feedback loops related to financial market disruptions or long-term implications of persistently high unemployment.” End of Quote

Containment & its relaxation measures, distribution of costs of the pandemic via subsidies to industry, wage support to laborers vis-à-vis liberalization of labour laws, any form of protectionism of any segment of the economy/players or any type of behavioural response may only give rise to further feedback loops, supported by the fluctuations caused due to COVID-19

5. Quote “The sustained efforts to prevent the spread of the virus would continue to significantly dampen activity across sectors of the economy until a vaccine (or another effective medical solution) were to become available. This is not expected to occur until around mid-2021. Therefore, this scenario envisages significant and permanent output losses.” End of Quote.

There can also be a trade-off to offset permanent output losses by relaxing the lockdown with monitoring mechanisms in place to make it an adaptive relaxation of lockdown, but every action will always have a reflection felt, however the reflections in this case may be unique.

6. Quote “The economic losses due to lockdowns began to build up in March – as different countries enforced lockdown measures – and after reaching a peak at the beginning of April, they are expected to decline to close to 50% of their maximum level by mid-May, end-May and in the course of June under the mild, medium and severe scenarios, respectively, as looser containment measures allow for a gradual restart of economic activity. While containment measures – coupled with the longer-lasting costs inflicted on activity stemming from the pandemic – are expected to exhaust their negative impact by end-2021 under the mild scenario, they would continue to weigh on economic activity in 2022 under the medium and severe scenarios” End of Quote.

This calls for National Level Changes in Policy and some fresh thought, though risky, compared to time-tested practices.

7. Quote “The COVID-19 pandemic and its fallout implies large losses for global real GDP. As a result of the high procyclicality of global trade with respect to global activity, euro area foreign demand would fall by around 7%, 11% and 19% under the mild, medium and severe scenarios, respectively, in 2020. Looking further ahead, losses in euro area foreign demand compared to its end-2019 level are likely to persist only under the severe scenario up to the end of 2022” End of Quote.

If such is the effect predicted, wouldn’t there be more drastic oscillations in the Indian scenario?

8. Quote “The uncertain epidemiology of the virus, the expected diverse effectiveness of containment measures and the assumed persistent economic damage under the medium and severe scenarios would continue to weigh on the economic recovery throughout the horizon” End of Quote.

Let us understand the situation, and take suitable short-term & long-term National Level Policy Decisions/Changes so that persistent economic damage to India can be minimised with extension to minimisation of global economic damage, accompanied with favourable factors like herd immunity variation, return of the skilled/unskilled from other Nations, changes in the global economic/political landscape.

International Cooperation may be maximised by ushering in these National Level Policy Decisions/Changes & subsequent National & International Collaborative Activity under the umbrella of the 17 UN Sustainable Development Goals (SDGs)

Reference is hereby sought to

Part 29

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