The IMF report says that 45 low-income countries have already applied for emergency financial assistance to combat the pandemic.
According to experts cited by CNBC, the current crisis has hit almost all countries evenly, as the pandemic is equally dangerous to everyone. However, every country has different capabilities to combat the pandemic crisis.
According to Raghuram Rajan, a professor at the University of Chicago Booth School of Business, developed countries have more financial opportunities. They have allocated up to 20% of their GDP as fiscal and monetary stimulus measures to support the economy and financial stability. Developing countries cannot afford this.
At best, they allocate 5% of their GDP, but often emergency measures to support their economies don't exceed 1% of GDP. Professor Rajan warned that powerful nations haven't paid enough attention to emerging economies. With limited fiscal resources, they may not be able to deal with the current situation on their own. Many countries are at risk of their debt increasing drastically in relation to their GDP, which will create another threat to financial stability amid the already dire situation caused by the coronavirus crisis.
The IMF statistics confirm the fears of uncontrolled debt growth in developing countries. According to the June World Economic Outlook report, 45 countries have already applied to the IMF for emergency financial assistance. According to the IMF's calculations, these countries' level of public debt for the 2020-2021 fiscal year will amount to 48% of GDP. At the same time, according to numerous economic studies, when the public debt level reaches 60% of GDP, the average annual economic growth rate decreases by 2%.
Singapore's Senior Minister Tharman Shanmugaratnam said that much of the world's GDP growth — about two-thirds of the global growth — comes from developing countries.
According to him, the world is now facing a real threat of these countries transforming from developing to degrading. In this case, the entire world's economic growth is at risk. In turn, Professor Rajan believes that the United States and China should start playing a constructive and leading role in supporting developing countries for the common good. He believes that it won't be possible to solve global growth problems without help from these major powers.
Indeed, both China and the United States have a major impact on the economy and development of the rest of the world. Therefore, the situation in other countries directly depends on their relationship.
China-US cooperation will benefit everyone. Unfortunately, the relations between the world's two largest economies have entered a downward spiral, Jiang Yuechun, director of the Department for World Economy and Development Studies at the China Institute of International Studies, said.
"China and the United States play an important role in the global economy. Cooperation between the two parties would contribute to economic prosperity and stability in the world. On the contrary, competition between the two will undoubtedly have a negative impact on global development".
"In the current context, be it economics, politics, or fighting against the epidemic, the US is taking an extremely negative approach towards China. I believe that such a stance on the part of the United States only aggravates the already difficult global situation".
According to the expert, China is trying to play a constructive role to resolve the global crisis caused by the pandemic. However, the US' failure to prevent the pandemic's spread threatens the American economy and, consequently, the development of not only the United States, but other countries as well.
"China's response to the epidemic was unprecedentedly tough, and it has brought clear positive results. Moreover, China has made maximum efforts to provide assistance to other countries, whether it is controlling the epidemic spread, or treating patients and providing medical supplies. However, it’s a pity that the United States has failed to cope with the epidemic. The number of cases in the US is growing, which threatens not only the United States' return to normal life but also the recovery of the American economy".
"On top of that, the US injects negativity to international cooperation. Washington refused to support the WHO at the most crucial moment when the whole world is fighting the epidemic. Neither do we see whether the US made any right steps regarding cooperation with other countries. The United States is a big player in the international community, and it must take effective action at a time when the world is facing a crisis".
The experts interviewed by CNBC count on the upcoming US elections. They believe that November will be a turning point when the two states will again be able to establish a dialogue.
However, the emerging bipartisan consensus in the United States on the need for a tougher approach to China raises doubt as to whether reshuffling in Washington can bring the two countries' relations out of the downtrend. Both Biden and Trump are using rhetoric of a Chinese threat in their election campaigns to justify any of their actions and the corresponding failures in the economy, social sphere, and politics.
However, it's important to understand that shifting responsibility won't contribute to the common cause of fighting the pandemic and recovering the global economy. This is what experts are talking about. We need to put aside mutual claims, at least for a while, and start working together.
