World Affairs in two scenarios…

Yesterday’s report discussed the “Development-Growth” paradox and certain anomalies found in the OECD’s global outlook report. Now, it’s time to go into details about the organization’s economic estimates.

According to the OECD, world economies will shrink as follows if the world is hit by a single wave of coronavirus.

United States 7.3%

EU 9.1%

China 2.6%

Japan 6.0%

UK 11.5%

Germany 6.6%

France 11.4%

Brazil 7.4%

India 3.7%

Mexico 7.5%

Turkey 4.8%

I honestly think that these estimates are a bit exaggerated. However, expectation for the future of the world economy would naturally worsen as long as OECD, IMF, World Bank and the like insistently keep releasing negative outlook reports. Despite the fact that the second quarter was already over, I find it rather dangerous to interpret figures belonging to that period as some kind of “shock”!

The “single-wave” scenario describes the possible decline in foreign trade with quite humble figures. According to OECD’s prediction, world economy will start improving by September 2020 at the latest, which means that the second quarter economic statistics will turn out to be worse than expected as guessed by the Chairs of IMF and ECB. Accordingly, OECD expects a severe economic recession on annual basis despite the 4-month improvement period. If you ask me, this particular part of the report is full of dilemma.

“Second-wave scenario seems more reasonable…”

On the other hand, OECD’s report does not present the second-wave scenario as a “nightmare scenario” compared to the first one. Quite intriguing indeed… There might be two main reasons for this:

  • If a second wave strikes, world economies won’t be capable of taking measures equally tough with those they implemented during the first wave of the pandemic because they would have already spent almost all of their financial resources during the first half of the coronavirus.
  • OECD might be thinking,

“We’ve already experienced the worst. A second wave may only make things a little bit worse.”

Here’s another economic recession scenario based on a possible second wave of coronavirus:

United States 8.4%

EU 11.5 %

China 3.7 %

Japan 7.3 %

UK 14%

Germany 8.8%

France 14.1%

Brazil 9.1%

India 7.3%

Mexico 6.6 %

Turkey 8.1%

The most interesting estimate of the OECD in the reports actually involves Mexico, according to which, if a second wave of coronavirus happens, Mexico is expected to be less affected by economic slowdown. The reason why OECD has a rather optimistic expectation for the economic future of Mexico may be because the country is already exercising the worst impacts of the outbreak. I must say that this particular detail, however, makes the report more interesting in terms of causing questions or doubt in people’s minds.

I don’t think Turkey will face a severe recession as foreseen in the report if a second wave of the virus does not strike. If it does, however, I must admit that OECD has made some spot-on predictions about a possible economic slowdown in Turkey, depending on the severity of prevention measures obviously. I think I would not be wrong in saying that if this scenario becomes true then countless firms would go bankrupt, countless long-established organizations would face terrible hard times and the critical infrastructure would be seriously damaged due to lack of funds.

So, as I have mentioned above, Turkey would not choose halting its economic activities either just like the rest of the world, which would sadly cause us to lose many people because of the disease. That’s why I sincerely hope that we won’t face another wave of this calamity.