The pandemic-induced economic crisis is set to leave deep scars on world economies, said International Monetary Fund Economists Oya Celasun, Lone Christiansen and Margaux Mad Donald in an IMF blog.
Capital erosion from prolonged high unemployment and school closures, value destruction from bankruptcies, and constraints on future fiscal policy from elevated public debt top the list of economic restraints, the three said. Groups that were poor before the pandemic and remain vulnerable are set to see the largest setbacks.
SWIFT GOVERNMENT ACTION HELPED
Swift and unprecedented action by policymakers helped avert an even worse economic crisis than what was witnessed, the economists said. The G20 has provided around $11 trillion in necessary support to individuals, businesses and the health care sector since the start of the pandemic.
However, much of the fiscal support is gradually winding down, and many benefits such as cash transfers to households, deferred tax payments or temporary loans to businesses have expired or are set to expire by the end of this year, the blog said.
In economies where deficits widened sharply this year, fiscal balances now are expected to narrow by more than 5% of GDP in 2021, the IMF economists said. While part of this reflects that growth is projected to strengthen, the largest contributor to improving fiscal balances is a sharp withdrawal of “discretionary” support/relief measures that had been introduced to counter the effects of the crisis.
That withdrawal of support is occurring at a time when employment losses from the crisis still are projected to be sizable, as evidenced by massive shortfalls in projected employment relative to pre-pandemic trends, they said.
SO, WHAT IS TO BE DONE?
First, support should be maintained throughout the crisis, the economists said. A premature withdrawal of support would impose further harm on livelihoods and heighten the likelihood of widespread bankruptcies, which in turn could jeopardize the recovery.
In such a scenario, crisis-related scars likely would become much deeper, they said. Where possible, economies should resist tightening fiscal policy too early and ensure continued support for healthcare, individuals and firms.
In economies constrained in their ability to spend, a reprioritization of spending may be warranted to protect the most vulnerable, they said.
Second, post-pandemic policies will need to be geared toward the new reality and build resilience, the trio said.
For instance, policies that promote investment and hiring in expanding sectors and provide reskilling and training opportunities to the unemployed will strengthen the recovery and make it more sustainable, they said.
The road to strong, sustainable, balance, and inclusive growth will be long and difficult, they said.
CATTLE, BEEF RECAP
Fed cattle trading last week was seen at $103 to $106.25 per cwt on a live basis, down $1 to up $0.25 from the previous week. Dressed-basis trading was at $160 to $162 per cwt, down $3 to $4.
The USDA choice cutout Monday was up $0.55 per cwt at $208.65, while select was up $1.38 at $192.62. The choice/select spread narrowed to $16.03 from $16.86 with 104 loads of fabricated product and 41 loads of trimmings and grinds sold into the spot market.
The USDA reported Monday that basis bids for corn from livestock feeding operations in the Southern Plains were up $0.05 to $0.12 at $1.20 to $1.25 per bushel over the Dec CME futures contract, which settled at $3.97 1/2 a bushel, down $0.01.
The CME Feeder Cattle Index for the seven days ended Friday was $136.48 per cwt, down $0.22. This compares with Monday’s Nov contract settlement of $136.97 per cwt, down $0.42.