Finance

“We have only just overcome the liquidity phase of the crisis in countries that are now relaxing restrictions. In many others, the health crisis is still acute. And the epidemic could flare up again anywhere,” the general manager, Agustin Carstens, of Bank for International Settlements (BIS) acknowledged in late June whilst discussing the Bank’s 2020 “Annual Economic Report”.

It’s rare for a national leader to be able to claim that an economic system is named after him, but Shinzo Abe, former prime minister of Japan, can. Abenomics, introduced eight years ago, has been an ambitious economic agenda seeking to bring the country out of its doldrums, characterized by deflation and debt. Has Abenomics met its goals? Not entirely, but it has realized some gains and staved off disaster.

“For the first time since the pandemic began, there is now hope for a brighter future.” That was the assessment given by the OECD (Organisation for Economic Co-operation and Development) on December 1 following the news of progress being made with coronavirus vaccines.

Is the current cure, in the form of lockdowns, for the COVID-19 plague worse than the pernicious virus itself? This hotly debated question has vocal supporters on both sides, as the pandemic continues to attack lives and livelihoods worldwide. Many believe that preserving human health and economic health need not be at odds but can both be achieved in the short term until a permanent solution for the virus arrives.

Could COVID-19 contribute to economic growth? In the United States, the upsurge in new-business applications indicates that despite its devastating effects on many small businesses, the pandemic may result in new startups being launched due to various causes, including the isolation and extra time for reflection resulting from closures. Although only a percentage of business applications result in business formations, the data suggests robust US business creation for 2020 overall.

Trade, a crucial component of healthy economies on all ends, has flourished over the past 20 years, and trade finance is the essential ingredient that has enabled its growth. The ICC’s 2020 Global Survey of banks worldwide asked participants how they planned to broaden their trade-finance provisions, even in the midst of a pandemic. For most, further digitalisation is part of their plans alongside increased market participation and product offerings.

The UK will complete the Brexit journey that it began four years ago on December 31, the final day of the transition period. Its future trade relationship with the EU is not definite, and the British are wisely preparing for a hard landing. This time of transition should be regarded as an opportunity to build a united country, one that is in a mutually beneficial trade partnership with the world.

COVID-19 has significantly impacted the liquidity of businesses worldwide, driving up the demand for funding and loans from nearly every corner of the global economy. As the effects of the pandemic continue to put strain on businesses’ operations, lenders should be prepared for a potential increase in fraudulent activities as cash-poor companies feel pressures increase.

In the United Kingdom, COVID-19’s impact on businesses has been tempered by a number of timely government loan schemes. That’s the good news. The bad news is that they will run their course, and the reeling in of the financial lifeline is guaranteed to cause a liquidity shortfall. What steps must be taken now to mitigate the inevitable blow to the economy that could snowball into yet another financial crisis?

The global economy is caught up in a vicious spiral of worsening financial conditions spawned by the pandemic. Many developing economies were lumbered with high debt loads before COVID-19, but the crisis has greatly aggravated their crippling debt situations. As millions of people teeter on the brink of extreme poverty levels, what are the three weakest gaps in the international debt architecture, and how can they best be patched up?