Pandemic Will Worsen World Economy in Near Term

The renewed outbreak of Covid-19 infections in some parts of the world has dampened the global economic outlook in the short run, said Philippine Central Bank Governor Benjamin Diokno.
“Recent events, I think, point to a deterioration rather than an improvement in the short run,” Diokno said on Wednesday during a virtual panel discussion at the Milken Institute Asia Summit, CNBC reported.
“So I would look at the fourth quarter up to maybe the first quarter of next year as worse than the IMF forecasts,” he added. 
The International Monetary Fund said in October that the global economy would contract by 4.4% this year, which projection Diokno said was “kind of optimistic”.
The latest IMF forecast was an upward revision from its previous projection made in June. 
“Recent events, I think, point to a deterioration rather than an improvement in the short run,” he said.
Investors have also turned more optimistic in recent weeks, following the progress made on the Covid vaccine front. The UK on Tuesday became the first country to start vaccinating the public outside of trial conditions.
Diokno said before the economic benefits of vaccines are felt, a deterioration in the Covid situation in Europe and the US would weigh down the economy.
Some Asian countries such as Japan and South Korea are also experiencing a resurgence in cases, he added.
Globally, there have been more than 68 million reported Covid-19 infections and over 1.5 million deaths, according to data compiled by Johns Hopkins University. The US, India and Brazil are the three countries with the most reported cases and deaths, the data showed.
Nevertheless, the availability of vaccines would lift global economic prospects beyond the first quarter of next year, said the governor. 
He added that China, which appears to be among the earliest to contain the coronavirus, will help Asia to lead the global economic recovery.
“With the vaccine or vaccines, I think the outlook for 2021 — the full year of 2021 — and 2022 are quite bright,” he said.
The Philippine economy is also likely to bounce back strongly next year, after an expected 9% contraction this year, said Diokno. 
The Southeast Asian country was in a “position of strength” when the pandemic hit, which gave policymakers the financial and policy space to support the economy, he explained.  
The Philippine Central Bank governor said the country’s economic recovery next year will be led by sectors such as construction and real estate, he said.