The COVID-19 pandemic has wreaked havoc across the globe, almost bringing the global economy to its knees. One year down the line, the pandemic is still with us and some regions are experiencing the second wave while others are facing the third one. Clearly, things don’t look appealing at all. However, like everything else, the pandemic will come to an end and things will get back to normal. And when this happens, how shall we start rebuilding? Shall we continue using the old and traditional systems, or should we brace for what the World Economic Forum (WEF) is calling the “Great Reset?”
In a January report when WEF was releasing its Chief Economists Outlook during the virtual Davos Agenda Summit, the WEF revealed that accelerating inequality, the market dominance of tech platforms, and remote working are likely to be the longest-lasting legacies brought by the pandemic. Beyond managing the pandemic and vaccine rollout, these trends could shape a new era of fiscal, monetary, and competition policy, according to the WEF report.
On the other hand, deglobalization was referred to as among the current trends that is least likely to continue in the longer term due to the significant role of international coordination in resolving global challenges such as vaccine manufacturing and distribution.
The WEF report, which was complied after consultations with chief economists both from public and private sectors, revealed that they were impressed at the speed and scale of fiscal policy measures employed in the wake of the pandemic.
The respondents further expect the second half of 2021 to be the optimal time to start transitioning from general emergency spending to more targeted spending on future growth sectors. The respondents suggested that efforts towards paying the significant national debts accumulated in 2020 should wait until 2024 or beyond.
Moreover, the chief economists believe that central banks settling public debt via quantitative easing at the core of monetary policy in response to the ongoing crisis, could lead to less central bank independence over time. Most of them also suggested that central banks should focus towards environmental objectives through their asset purchases, which would indicate a key departure from past practice.
The chief economists also project a brighter outlook due to the following two reasons;
- The vaccine which will help speed up the recovery.
- A new US administration which will contribute to tackling short and long-term challenges both domestically and worldwide through revived multilateral institutions.
Challenges on the way.
The COVID-19 virus mutations pose a huge risk for 2021, which would slow efforts to contain the pandemic and bring a new wave of lockdowns.
Another challenge relates to poorly calibrated policy responses that pose the risk of failing to distinguish between the deep structural impact of the pandemic on some sectors and the temporary stopping of activity in other sectors.
According to WEF Managing Director, Saadia Zahidi, the report clarifies that the key to global economic recovery and transformation is “precisely calibrated and coordinated fiscal, monetary, and competition policy.” Zahidi further believes that there is no better time for “governments to work together and invest in a fair transition to a greener and more inclusive economy” that this.
Work cited.
