Coronavirus: Western economies gradual to react to disaster, says main economist

Raghuram Rajan, former governor of the Reserve Bank of India.Image copyright Getty Images

The coronavirus was “taken a little more lightly” by western economies in comparison with these in Asia, says a former IMF chief economist.

Raghuram Rajan mentioned western economies are dealing with a drop in financial progress by as a lot as 6% this yr.

The widespread closure of companies is having an enormous monetary influence as governments forestall the virus unfold.

His feedback come because the IMF warns the worldwide economic system faces its worst disaster for the reason that 1930s melancholy.

“I think in the west, partly because there hadn’t been a direct experience of a serious epidemic, it was taken a little more lightly,” Mr Rajan informed the BBC’s Asia Business Report on Friday.

“This is one thing taking place in faraway lands, it isn’t going to be severe right here.

“It’s all too easy to point fingers after the fact but what I’m saying is that the countries in East Asia that had the experience of previous pandemics, which didn’t quite rise to the level of pandemics I should say… but previous epidemics, they took this seriously right from the get-go.”

Mr Rajan, a former governor of India’s central financial institution, praised South Korea and Singapore as two Asian economies which have dealt with the virus outbreak nicely.

For his native India, he warned that it had “limited tools” given how densely populated the nation is.

“It’s hard to do social distancing anywhere in the normal course. Your markets are chock-full of people. Your dwellings are chock-full of people. And so I think the government is trying to attempt to reduce the pace of increase with this lockdown.”

His mentioned it was essential to ship the message to folks to take this pandemic severely.

“This is not fun and games, this is really about life and death, and if it really explodes in India, we really don’t have the resources to deal with that.”

The economist, who’s a finance professor on the University of Chicago Booth School of Business, gave a bleak forecast for western economies as he expects them to shift from growth to contraction.

“At this level, we’re most likely pondering of western international locations seeing a shift in GDP progress from about 2 share to three share factors, to adverse four or 5 share factors.

“Each country is going to lose 5 to 6 percentage points of GDP at the very least over this year. So cumulate that, that’s significantly more than $2 trillion”.

To get via the disaster, Mr Rajan needs to see economies working collectively to share sources relatively than being protectionist.

“We saw countries hijacking each other’s medical supplies, we saw countries banning the export of precious medicine. These are things which make everyone worse off.”