As if the world needs another crisis, an esteemed economist has warned that the coronavirus pandemic is “morphing into a major economic crisis.” World Bank Vice President and Chief Economist Carmen Reinhart told Bloomberg that the extending uncertainty of the pandemic is creating greater damage to the global economy.
“This did not start as a financial crisis, but it is morphing into a major economic crisis with very serious financial consequences,” Reinhart told Bloomberg. “There’s a long road ahead.
“This is a war. During wars, governments finance their war expenditures however they can, and right now there are dire needs.”
Reinhart, the former Harvard professor who became chief economist in June, warned that roughly half of poorer countries are either in or approaching debt, most of which is owed to China; but, the economic historian said, China is not fully participating in debt relief. The World Bank wants a one-year extension of debt relief for the poorer countries, which are more vulnerable to the pandemic.
Reinhart noted that emerging markets were a bright spot during the 2008-09 crisis, but that will not be the case this time. “This has been a very regressive crisis,” Reinhart said on Bloomberg. “It’s hit the poorest within countries and across countries.”
The Capital reported how this year’s nosediving unemployment and poverty rates prompted International Monetary Fund Managing Director Kristalina Georgieva to estimate that global economic losses could reach $28 trillion in lost gross domestic product over the next five years.