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Arrest the virus first and the markets will recover

Asia Analytica
Asia Analytica3/27/2020 06:30 AM GMT+08  • 7 min read
Arrest the virus first and the markets will recover
SINGAPORE (Mar 27): The biggest hit to the global economy comes not from the virus itself but from the escalating restrictive movement measures imposed by governments.  “Social distancing” is probably among the most repeated phrases these days, alon
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SINGAPORE (Mar 27): The biggest hit to the global economy comes not from the virus itself but from the escalating restrictive movement measures imposed by governments. “Social distancing” is probably among the most repeated phrases these days, along with “stay at home” and “shelter in place”, and words such as “quarantine” and “lockdown”.

Many market observers are fretting over a global recession or, worse, depression. Certainly, upcoming economic indicators will be very, very bad, but not very meaningful in the current environment. The radical containment measures affect both the demand and supply sides in the economic equation. Manufacturing is down sharply because almost all production output is halted, save for essential goods. Plants are lying idle as employees are forced to stay home. Every bottleneck will mean cascading disruptions for the entire supply chain.

The services sector is similarly severely affected as demand collapses. Retail outlets, malls, bars, clubs, restaurants, theatres, gyms and others have all been ordered to shutter. Local and international travel is grinding to a near stop. Of course, GDP — which is a measure of economic activities — will contract sharply. We engineered it, indeed made all efforts to ensure this will be so.

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