World Bank warns against shift to protectionist policies and simplified supply chains to combat coronavirus

The World Bank has advised national governments not to react to the rise of coronavirus (Covid-19) and its devastating impact on the global economy too hastily by raising protectionist barriers and particularly by restricting the export of badly needed food and medical products. Now is the time for the nations of the world to pull together to combat the virus and not pull up the shutters. A rise in protectionism would amplify serious supply chain problems and make the battle against the virus more difficult, said the bank. Also, the World Bank has advised policymakers to encourage businesses to rethink their supply chain strategies in the medium to longer term. The Covid-19 crisis has once again revealed just how vulnerable to shocks the global supply chain system has become, and business are advised to hold higher stocks and diversify suppliers to more effectively manage this risk. “Governments should avoid protectionist policies, which would exacerbate disruptions to global value chains and amplify already elevated levels of uncertainty. Even more important, governments should avoid restricting exports of necessary food and medical products and instead work together to support increased production and ensure that resources flow to where they are most needed,” said Ceyla Pazarbasioglu, vice-president, equitable growth, finance and institutions, World Bank Group. “In the medium term, as economic conditions improve, the lesson for policymakers is not to look inward, but to encourage businesses to hold a higher level of inventories and diversify suppliers to best manage risk,” she added. The World Bank said that, for now, a coordinated, concerted and speedy response is needed by all nations whether they are affected now or not. Any nation or business that pretends that it can avoid the impact in this highly interconnected global economy is fooling itself, said Ms Pazarbasioglu. “No one can reliably predict the full economic impact of the outbreak. Too much depends on what is unknowable – how long the outbreak lasts, how many countries it afflicts, and the extent to which a coordinated, concerted, fast-track policy response is mobilised and sustained. But what we do know is that the outbreak arrived at a weak point for the world economy, when global growth was beginning to pick up from its lowest rate since the 2008 financial crisis,” she said. “That has troubling implications for developing economies: Tighter credit conditions, weaker growth and the diversion of government resources to fight the outbreak would reduce funds available for key development priorities. An economic slump would also set back the fight against extreme poverty. It is imperative, therefore, that policymakers everywhere recognise how economic harm can be transmitted from one country to another – and to act quickly to prevent its spread,” she continued. “That transmission is likely to occur through several channels. The first is trade: global value chains, which account for nearly half of global trade, are being disrupted by factory shutdowns and delayed resumption of operations. The second is foreign financial flows, which could be shifted away from coronavirus-affected countries. The third is domestic capital – human as well as financial – which is becoming underutilised as factories are idled and people stay at home. The fourth is transport and tourism, a major revenue stream for many developing countries that is shrinking with declining demand and expanding travel restrictions. Finally, sharp drops in commodity prices will harm developing countries that rely on them for much-needed revenue,” said Ms Pazarbasioglu. “Despite the turbulence in financial markets, policymakers need to remain level-headed. They should employ their full arsenal of policy tools, including monetary, fiscal, trade and investment policies, to improve confidence. The unprecedented, synchronised and coordinated policy response during the global financial crisis was critical to contain it. Once again, these are testing times for policymakers – they must rise to the occasion by acting quickly, decisively and in collaboration,” she concluded.

World Bank warns against shift to protectionist policies and simplified supply chains to combat coronavirus

Want to read this article?

Read Next

Marsh tracks slowdown in global Q1 rate hikes

Markel names head of terrorism in London

Insurers defend Nord Stream’s €400m lawsuit as act of war

Allstate posts nat cat loss of $343m for March

UAE flash flood losses manageable as insurers adapt to changing weather

Marsh tracks slowdown in global Q1 rate hikes

Markel names head of terrorism in London

Insurers defend Nord Stream’s €400m lawsuit as act of war

Allstate posts nat cat loss of $343m for March

UAE flash flood losses manageable as insurers adapt to changing weather

Want to read this article?

Read Next

Marsh tracks slowdown in global Q1 rate hikes

Markel names head of terrorism in London

Insurers defend Nord Stream’s €400m lawsuit as act of war

Allstate posts nat cat loss of $343m for March

UAE flash flood losses manageable as insurers adapt to changing weather

Related Articles