Question

In terms of long run growth, do you think there will be a negative impact due to Covid? Will the impact be different for countries that are currently high income compared with low income countries? Do you see any potential for a positive impact on economic growth as a result of the pandemic?

Answer 1

Long term growth is affected when there is a significant loss of capabilities, human resources or loss of capital due to the natural disaster. In this context, there is a temporary impact of COVID-19 pandemic, though it is severe than ordinary recession as demand and supply both are negatively affected at the same time. But, it will not affect the long term economic growth in a way that COVID-19 pandemic is not going to destroy capital, though there are loss of lives. Here, unemployed portion of labor force will come in and fulfill the need of work force. So, long run growth will not be affected, but it will take more than 1 year to recover from the negative impact of COVID-19 pandemic.

Impact of COVID-19 pandemic will different to different countries based on income, resources and health infrastructure. High income countries can recover from the impact sooner than the countries with poor income. It will happen, because government of high income countries, can spend more money and give more of direct cash to their people to maintain demand in the economy. With good health infrastructure, they can provide health care and help eliminate the negative impact of COVID-19 pandemic. But, the same quick response is not possible in poor income countries. So, these countries rely on supports from other nations and it is difficult in this time as COVID-19 pandemic is across the world and all countries are fighting against it.

Positive impact of this COVID-19 pandemic can be seen in terms of clean air, less pollution and reduced impact of green house gases. It creates more scope of economic activities and it can be accelerated for the lost real output across the world. So, it is a positive development as world have been facing climate changes and it has become a challenge for all the nations. Here, COVID-19 pandemic has brought positive impact.