Chief Economist of PT Bank CIMB Niaga Tbk, Adrian Panggabean, predicted that the global economy will contract by minus 5 percent in 2020. Adrian even said that this contraction was the worst in the last 80 years. In 2021, the global economy will recover (rebound) partially in the range of 3 percent-4 percent. “The projection range of global economic growth is in the range of -5 percent to -4 percent in 2020, the worst in 80 years,” said Adrian in his report, Wednesday (14/10/2020).
Adrian said that the global economic recovery in 2021 is still marked by high uncertainty. Next year, it seems that there are still sharp business fluctuations. Recovery can be patchy across countries.
Especially at this time, the Covid-19 virus still infects more than 140 countries in the world. Hopes for a speedy recovery in socioeconomic activity are running low again, due to the rising tide of infection cases. “Cases of tidal infection have occurred in many countries, for example in the US, Germany, France, Spain, Italy and the Netherlands,” said Adrian.
Factors That Slow Down Economic Growth
Adrian explained that the slow pace of global economic recovery occurred because the current crisis was different from the two previous crises. At least, there are 3 distinguishing aspects.
First, whether there is a balancing factor for global growth in this year’s crisis. The crisis that occurred in 1998 and 2008, the crisis only hit part of the region. This means that other regions that are not hit by a crisis can still act as a counterweight to global economic growth. “In 2020, the world will not have a balancing element. Because the whole world, without exception, has been hit by a crisis,” he explained.
The second factor was that the crises that occurred in 1998 and 2008 were more of a financial and economic nature, and were biased towards a demand shock. In some cases, accompanied by political referrals. Meanwhile, in 2020, the crisis occurred triggered by health factors which then halted human mobility and economic shocks.
Third, if in the 1998 and 2008 crisis, regional framework solutions helped regional negative spillovers. Then in 2020 negative spillovers that are global in nature do not yet have a global framework solution.
“In fact, in many cases, the rivalry is actually happening. The vaccine development process which is not characterized by close global cooperation is a contemporary example,” said Adrian.