Insights from Dr. Bandit Nitchathorn on the global economy in the next 6-12 months, which may face three major storms: the ongoing COVID-19 pandemic, economic downturn, and political instability. How will these factors impact the economy and the livelihoods of people worldwide?

Last week, I wrote an article titled "Economic Thoughts for the Second Half of the Year" discussing Thailand's economy in the latter half of the year, prompting many fans of the "Bandit Economics" column to ask how the global economy will fare. They wanted more details, and I understand their concerns, as anyone following the global economy right now can feel that it is facing significant issues with a barrage of bad news. Today, I would like to share my perspective on the global economy over the next 6-12 months, where it may encounter three major storms that will greatly affect the economy and the well-being of people around the world.

The first storm is the ongoing COVID-19 pandemic, which continues to be a global issue. This is particularly true for countries that have not managed to control the situation in the first wave and for those experiencing a second wave after initially handling the outbreak well, such as China, Japan, Hong Kong, Singapore, Vietnam, and most recently, New Zealand, which has had to reimpose partial lockdowns. The latest global COVID-19 case count has surged by over 21 million, with a cumulative death toll exceeding 750,000, and these numbers continue to rise daily, showing no signs of decline.

The second storm is the economic downturn resulting from the COVID-19 pandemic, particularly in large economies such as the United States, Indonesia, Mexico, Russia, Turkey, Saudi Arabia, South Africa, India, and Brazil. This will significantly limit the recovery of the global economy over the next 6-12 months, affecting international trade, domestic spending, tourism, and the financial health of companies, leading to a prolonged and delayed recovery.

Importantly, unemployment will rise to such an extent that joblessness will become a major global issue. The International Labour Organization (ILO) estimated in June that if the COVID-19 pandemic persists with a second wave, the slow recovery of the global economy will reduce working hours globally by 12%, equating to approximately 340 million unemployed individuals, a figure that may seem low given the current situation.

The economic downturn will push the global economy into a severe recession, necessitating increased government spending to mitigate the impact. In industrialized countries with stable fiscal positions, governments will need to borrow more to alleviate the effects. However, in emerging market countries where fiscal positions are often constrained, increased borrowing will put them at risk of a financial crisis, complicating economic recovery efforts and increasing the likelihood of both debt and fiscal crises.

For countries that rely on the global economy for growth through trade, investment, and tourism, such as Thailand, a severe global recession will further limit recovery, necessitating reliance solely on domestic factors. This means that if the global economic downturn lasts for 2-3 years, these economies will need to adapt to survive during the ongoing COVID-19 pandemic and the post-COVID period, where the global economy will not return to its previous state.

An example of this is the warning given to Singaporean businesspeople by Singapore's Minister of Trade and Industry, Chan Chun Sing, last week, stating that the business world will change in four ways: 1. Increased tensions between China and the United States will affect international trade and hinder free trade; 2. A reversal of globalization, where foreign companies will invest less abroad to reduce supply chain risks; 3. Rising unemployment due to job losses to technology or foreign labor that can work for Singaporean companies from their home countries; 4. Slower economic growth will exacerbate inequality issues. All of these factors will create significant challenges for the economy and the well-being of people in the country.

The third storm is the increasing political instability within countries, fueled by protests against government actions in addressing issues and the ongoing economic downturn. There is a perception that governments are unable to effectively solve problems and manage the country, making public protests a serious concern that is likely to increase. This discontent has been building since before the pandemic, as citizens have lost faith in the political system and are disappointed with the government's ability to address issues.

According to the Carnegie Endowment for International Peace, there were over 100 government protests worldwide from 2018 to 2020, leading to more than 30 changes in government or political leadership, with the most significant occurrences in South America and the most severe in the Middle East. In 2020, during the COVID-19 pandemic, protests erupted in over 30 countries worldwide regarding government responses to the pandemic, misuse of power, unemployment, corruption, constitutional amendments, government legitimacy, racial issues, and the justice system.

What is concerning is that if the economic downturn worsens and the COVID-19 pandemic persists, while people are left unemployed and without income, public anger and dissatisfaction will increase, potentially leading to political instability. Recently, in Lebanon, a government change occurred as a result of an explosion. These political factors cannot be ignored and must be treated with caution and importance.

Our country must also be wary of these three storms to avoid a perfect storm that could severely impact the economy. Preventive measures must begin with careful public health policies and cautious reopening to reduce the risk of a second wave of infections, utilizing fiscal resources to stimulate the economy effectively and without leakage, and addressing existing political issues peacefully with the participation of all parties for the benefit of the entire nation.

SOURCE: www.bangkokbiznews.com