Response in the Developed countries
KAMPALA – On the economic side, the country will continue to slide into a recession. How long this will take nobody knows much depends on the solution to the coronavirus problem. The developed world has already seen a downturn in the various economies. Governments in these countries are planning stimulus packages to create demand and restart their economies. The Americans have put up 2 trillion dollars for the purpose, the British 30 billion pounds, the Germanys have put up 814 billion dollars and many other countries have initiated similar packages. The intention is to stimulate business activities in their respective economies to ensure that the country recovers economically.
The stock markets of leading economies have their largest dip in their history. The Dow Jones, the FTSE, the Dax and all other large markets have tumbled by over 10% in the last one month. The drop is bigger than that of the 2007-2009 greater recession which is the worst drop markets have had in financial market history.
Central banks have already reduced the bank rates in a bid to avail credit to lender institutions for onward lending. In the US, the federal reserve rate is for all intents and purposes Negative. This means that Central banks can print more money and lend to governments. The government are examining various options as part of the stimulus package besides putting funds for infrastructure development, governments are looking at other measures including tax cuts as an incentive to investors, enabling those who has been laid off to pay their rents and buy foodstuffs, supporting the elderly, among other measures.
The success of these measures depends on stopping the virus from spreading further, this is the famous shut down being implemented in most developed countries. The shutdown will involve a voluntary or forced isolation and quarantine so that people don’t come into contact with one another. It will be followed by the testing of the majority of the population who should voluntarily come up for testing. It only after this that the economy can be addressed. The developed countries have a high degree of capacity to manage these activities. They have scientific know-how, they have the political will, the money and cohesive power to implement measures to control the problem on their hands. This is waterloo for developed countries.
Juma Waswa Balunywa, is a scholar in management, leadership and entrepreneurship. He is also an academic administrator, who serves as the Principal of Makerere University Business School, a public institution of higher education in Uganda.