Governments Must Spend To Support Coronavirus Affected Economy, S&P Says

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With the coronavirus pandemic exacerbating the global economic slowdown, governments around the world may have no choice but to increase spending to support businesses and households until next year, according to an economist from S&P Global Ratings.Many governments have announced significant tax support in the wake of the pandemic. But some countries, including the United States, have shown “some fiscal fatigue” and are considering rolling back some of the stimulus, said Shaun Roache, chief economist at the rating agency for Asia. -Peaceful.

“We’re seeing some budget makers thinking about withdrawing some of their measures or maybe letting them expire without renewing them, and that’s a pretty dangerous thing to do when demand in the rest of the economy is still quite suppressed.” , he told CNBC. “Squawk Box Asia” Monday.

“We anticipate and hope to see some of these tax measures being renewed, postponed next year. This will mean more fiscal easing, but at the moment there is no alternative, ”he added.

Roache explained that additional spending would worsen the balance sheets of governments, but that there was a need to “prevent things from getting worse.” This is especially true when authorities must take measures that suppress economic activity to contain the virus given the lack of an apparent medical solution to the outbreak, he added.

Earlier this month, S&P Global Ratings downgraded its forecasts for the global economy. It now expects global gross domestic product to fall 3.8% this year – worse than the 2.4% contraction it previously projected.

The global economy is expected to rebound to an average growth of 4% between 2021 and 2023, but the level of economic output in almost all economies is expected to remain below 2019 levels – before the virus spreads globally – for several years, the agency said. in a report.

“So we are not going back to where we would have been in the absence of the virus and to a very large extent this reflects a large part of the damage that has been done … to the labor markets but particularly to the balance sheets and it is not the case. going to be repaired easily or quickly, ”Roache said.

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