MINSK, 3 June (BelTA) - The COVID-19 pandemic has exacerbated “the virus of deglobalization of the world economy”, said Ph.D. Vitaly Demirov, an analyst at the Belarusian Institute of Strategic Research (BISR).
The novel coronavirus pandemic will eventually end. But the world economy will be reeling from it for a long time. COVID-19 has exacerbated “the virus of deglobalization and to some extent reindustrialization”, the expert noted. However, the process started earlier. “This is a structural financial crisis, a debt crisis. As is known the total world debt exceeded 200% of GDP in 2019. The situation, when this indicator is high, when the inflation rate is high, is very bad,” Vitaly Demirov said.
“The current crisis is about to turn into a systemic crisis. The task for the world centers is to enter it smoothly. Today we see how global value added chains are being restructured. They are already talking about large macro-regions of stability rather than globalism,” the expert noted. In this regard, it is advisable to change priorities in export, monetary and innovation policy. Greater emphasis should be placed on the domestic market and increasing domestic solvency. “This will be a safety cushion, a springboard for export expansion into premium market segments,” Vitaly Demirov believes. As an example, he cited the European market of public electric transport, where there are not so many manufacturers boasting the resource of Belarusian manufacturers. In order to strengthen their chances of tapping the premium markets, it would make sense to consolidate production facilities to enhance the synergistic effect, the analyst said.
Vitaly Demirov concurs with foreign colleagues that the world economy is entering an era of deflation. He compared the current situation to the Great Depression. “It originated from a deep deflationary shock, and it is worse than inflation. This is why the most important thing now is the main production assets of enterprises. If they re up-to-date, then it will be possible to pass the deflationary shock period smoothly. All other indicators are secondary,” the expert said.
The decline in production, the services market, the fall in consumer demand have come on the heels of quarantine measures due to COVID-19. Perhaps there are no industries that would have not been affected. Among the first to suffer was the tourism industry, which employs more than 300 million people, or about 10% of all world workforce. Investment activity decreased. Major international institutions such as the IMF, the World Bank, forecast a significant contraction of the global economy in 2020.
