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depression. IMF Blog.  The Great Lockdown: Worst Economic Downturn Since the Great Depression – IMF Blog.

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2014. Bloomberg. CPI: At 7.59%, Retail Inflation Spikes To The Highest Since May 2014 (bloombergquint.com).

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percent in February of 2021. (n.d.). Trading Economy. European Union Unemployment Rate | 2000-2021 Data | 2022-2023 Forecast | Historical (tradingeconomics.com).

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more). Loanstreet. Budget 2021: 15 Things (Tax breaks, Handouts, Subsidies & More) (loanstreet.com.my).

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To plan to reduce the impact of the coronavirus pandemic on the country’s exports and tourism, Bank Negara Malaysia (BNM) has cut the key interest rate to the lowest in 10 years. The central bank has cut its overnight policy rate by about 0.25%. The reduction in overnight policy rate (OPR) is to provide the accommodative monetary environment to support the projected improvement in economic group and price stability. Previously, the group of seven nations has worked together to stabilize the economic hit of the coronavirus. BNM governor has suggested adjusting the interest rates to support global supply chains and tourism. The government has announced that they will provide RM20 billion to soften the hit from the pandemic outbreak, and provide tax breaks and cash to assist those companies that have affected.

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US goods exports have fallen off seriously as the global economy froze that affected by the coronavirus pandemic. In observation, the exports of US goods have decreased about 6.7%, and reduction of American automotive almost until 18%, the industry supply shipments also affected to drop about 7.5%. Fortunately, the demand for personal protective equipment and medical supplies become higher. But inversely, the other sectors are impacted by the global factory shutdown and the consumer demand is depressing. All the consumers have canceled all the high-priced items orders. There is a big problem in the US is the product imported is highly higher than the US exports, leads to the trade deficit almost increase about 7.2%. The analyst has predicted the year 2020 will be the worst year for international trade, global trade will shrink by about 15%. The commitment in the partial US with China trade that has signed in mid-January is seriously hampered by the effect of trade slowdown.

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The economy in Europe contracted and created a new record, about 3.8% in the first quarter of business activity. This is the highest reduction of the economy in Europe since 1995.  The economic affected by the spreading of coronavirus, the government need to freeze all the operation of the industry such as hotels, restaurants, constructions, and manufacturing by a shutdown to prevent the spreading of coronavirus. The unemployment rate rose leads to millions of workers are encouraging the temporary short-term program which is the government provided cash to pay most of their salaries to prevent the companies make the action of downsizing. Moreover, Europe has underestimated the shutdown measures. Both economies of France and Italy countries are also affected by the fall into the recession that affected by those industries which involve face to face interaction such as hotels, restaurants, retail stores, transportation, and construction. European Central Bank is predicting to expand its bond purchase program that supports governments and borrowing markets but needs to pending to the agreement from the bank head at first.

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According to the RBI annual policy report has mentioned that the negative growth of global trade and the lockdown policy have affected the economic activity in India. Because of the problem of supply disruptions, there is the effect to increase the food prices and the price of the non-food items. The consumer price index (CPI) inflation is recorded that there has exceeded the upper limit in December 2019 and top record in January 2020, before the price of vegetables, fruits, and petroleum products produced are declined. The inflation in the short-term is depending on the changes in the price of vegetables, also other effects of incidence on various elements, such as the evolution of the covid19, and the inflation pressure also will affect the other food prices. Looking through to the evolution of the covid19, the people mostly already have expected that the inflation will make the price level become higher. The inflation expectation of the people such as households and the firms can portray the future inflation through the price and wage to set the behavior.

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This article is showing that the Bank Negara Malaysia (BNM) has cut the key interest rate to reduce the impact of the coronavirus pandemic on the effects of exports and tourism. The exports and tourism sectors are seriously affected by the pandemic of coronavirus. BNM governor has suggested using the monetary policy in adjusting the interest rates to support global supply chains and tourism,  I agreed with this policy because when the interest rate has decreased, reduce the cost of borrowing and the spending on investment goods will also increase, quantity demanded of the goods and services also will increase, AD increase, GDP also increases. The BNM maintains the OPR to 1.75% (Aziz, 2021). The action that did by the BNM governor is called the interest-rate effect.

Furthermore, I recommend to execute the expansionary fiscal policy. Coincidentally, the government in Malaysia has planned to execute the expansionary fiscal policy. They are announced that they will provide RM20 billion and provide tax breaks for assisting those companies that have affected the pandemic. This policy has increased the AD through government spending and provide tax breaks. The effect of this policy is the spending of investment will increase after the tax break is provided. According to Rahim (2021), mentioned that the income tax will decrease by 1%. The spending of consumers also will increase by the decreasing of personal income tax., the government spending will increase through the government spending to increase the expenditures on final goods and services (“Fiscal policy”, n.d.).

The expansionary fiscal policy has increased investment, consumption, and government spending, which means that the AD will increase as GDP increase.

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The actions of the shutdown of the countries cause the exports is also decreased such the exports of US goods have decreased, their automotive decrease, causes the industry supply shipments also affected and has fallen. According to the data has released from the OEC, there has mentioned that the export growth from January 2020 to January 2021 has a deficit of 0.85% compared to the import growth from January 2020 to January 2021 at 4.71%, this is showing that the imports have exceeded the exports (“Latest Trends in US”). This situation causes the product imported is higher than the exports, the net exports become deficit, which will affect the real GDP.

I recommend to change and make the exports cheaper and the imports more expensive, leads the consumption to domestic demand will increase, the demand in exports rose, and imports decrease, the net exports will be stable and profitable, Y increase, GDP will increase sluggishly (Pettinger, 2018).

Furthermore, the government in the US supposed to plan for the exchange rate effect, the price level declines, decrease in the interest rate, also depreciated the US dollars to stimulate the net exports in the US, the quantity demanded of goods and service will be increased. Net exports increase, Y will also increase, GDP will increase as follows, the economic growth will be back to stable.

After a few of planning, the export growth is increasing sluggishly, although there is still in deficit. In May 2020, the export value is $90.7b, but the export growth still in deficit 36% compared to December 2020, the export value is $133b, and the economic growth in deficit 2.07, this is showing that the export growth has to increase sluggishly (“Latest Trends in US”).

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The Covid19 has affected the operation of the industry been frozen such as hotels, restaurants, constructions, and manufacturing to prevent the spreading of coronavirus. This situation causes the unemployment rate to increase. According to the data that has released, there is 6.7% unemployment in April 2020 but after the situation of lockdown, the unemployment rate has increased rapidly, there is the top record in July-October 2020, almost 7.8% of the unemployment rate  (“Unemployment rate in European”, n.d.).

I recommend increasing the real GDP that includes consumption, government spending, investment, and net exports. For example, European Central Bank is predicting to expand its bond purchase program that supports governments and borrowing markets. There will be increase spending on investment goods, then the quantity demanded will be increased, aggregate demand also rose, GDP increase, the unemployment rate will be reduced. This is called the interest-rate effect.

Additionally, the helping of the government also can reduce the unemployment rate. For example, the government has provided cash to pay most of their salaries, this situation is to support them sustain their operation of the business and not to do the action of laid-off. The unemployment rate decrease and production will increase, causes AS increase leads to Y increase, then GDP increase.

According to the data that has given, mentioning that the unemployment rate finally returned back and drop sluggishly to 7.3% after January 2021 after a few actions to prevent the increase of the unemployment rate (“Unemployment rate in European”, n.d.).

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All the industries in different sectors have been freeze, the operation has stopped such as manufacturer and construction. So, the production of food items or non-food items is going less. The supply has disrupted, the production decrease, and it makes the consumers will more willing to pay more to buy the products or items, this will cause the inflation increase. AD extremely exceeded, AS declines, causes inflation increases. Inflation will make the money become less valuable. Less production also will increase the price of products. As predicted, the price level will rose, GDP will drop, and the unemployment rate will increase. This is showing the type of market is imperfect. The output deviates from its natural rate when the actual price level deviates from the price level expected. The consumer price index (CPI) inflation has exceeded the top record in December 2019 and in January 2020.

According to the data that has mentioned, the CPI inflation is 7.35% in December 2019, and there has 7.59% percent in January 2020. Previously, there have a few economists, about 20 people have predicted that there will be 7.4% in January 2020, but the record in January 2020 has exceeded the estimation by the economists. (Nataha, 2020).

In my opinion, the only can do in this evolution of coronavirus is to control other parts to reduce inflation. For example, control the wages. Nominal wages are stick in the short run, so the firms can adjust steadily by setting the nominal wages based on the price level that they expected. Decrease the wages, the spending from the consumers will be less, AD will reduce to control the inflation. The other way is managing the supply-side policy. This policy can make the economy become more competitive, then will cause them to moderate the inflationary pressures. The labor markets more flexible, the inflationary pressure also will be reduced (Pettinger, 2019).

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Pasha, H. A. (2020, April 19). Economic impact of coronavirus. International The News. Economic impact of coronavirus (thenews.com.pk).

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The spreading of Coronavirus has affected the global economy to get worse. IMF has estimated the global GDP will fall by about 3% in 2020, the WTO also warning that the world trade will contract about 32%. ILO also has mentioned there will be 190 million people unemployed. The negative GDP growth has affected the reduction of exports, private investment, and consumption. Additionally, the lockdown policy and GDP declines affect the unemployment rate and poverty line increase. IMF has indicated that not only need to expand medical and health facilities, there must put effort to prevent the problems of unemployment too. The government has started to plan some relief activities for preventing the increasing rate of unemployment keep increase, they are started to transfer cash to the households. Moreover, the SBP has announced that they will provide funds for those private businesses to continue their operation and maintain their workers over the next three months.

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Nowadays, the spreading of coronavirus affected many countries, they are facing a lot of crisis which is a health crisis, financial crisis, and the shrink in commodity prices. The great lockdown in 2020 makes the economic growth in a recession, there is an estimation about global GDP will fall by about 3%, world trade contract, and unemployment rate increase. This is the worst economy that we met since the great depression. Previously, the first big recession economy is in the year 2009, the global financial crisis has enabled the global GDP to drop about 0.1% (Gopinath, 2020). Gross Domestic Product (GDP) is used to measure the total income and total expenditure in the economy.

There are two main aspects of economic growth which are aggregate demand (AD) and aggregate supply (AS) (Pettinger, 2018). Economic growth is increasing in national income means there will be higher real GDP (Pettinger, 2018). In my recommendation, the economists need to work on some activities to increase the economic growth to solve the financial problems that occurred by the spreading of coronavirus. The first recommendation is arising the AD to increase the economic growth, AD is the meaning of total demand that is including the consumption, government spending, investment, and the net export (exports-imports). There have many ways to increase the AD, such as increase the real wages, if the inflation is under the nominal wages, the consumer spending or we called consumption will increase. The aggregate demand higher, economic growth increases, GDP will be increased.

Additionally, if AS rose can increase the economic growth, then the GDP will increase. AS is the meaning of total supply that includes productive capacity, the efficiency of the economy, and labor productivity. In the evolution of coronavirus, I recommend the rules of working can be more flexible, such as working from home or self-employment by using the internet. Also, can change the retirement age, if the retirement age has raised the supply of labor will increase. Productive capacity larger, aggregate supply higher, economy growth increase, GDP will be increased.

Furthermore, the action of the government also will affect the economy. For example, there has started to transfer cash to those households and this action will make the aggregate demand increase and GDP increase because the consumption will be increased. The next action is SBP has announced that they will provide funds for those private businesses to help them maintain their operation and to prevent job cuts, prevent the unemployment increase continuously. For this action, the production capacity and labor productivity increase, the aggregate supply will also increase, the GDP will increase as follows.

Gopinath (2020) has mentioned there are positive real GDP at 2.9% in 2019, the economic growth is still healthy, but when the coronavirus has come at the end of the year 2019, the countries have managed to lock down their own country successively to avoid the coronavirus spread around the world. But the action of lockdown severely affect the economy into recession, the real GDP has about a deficit of 3% in 2020. After everyone’s effort and the policy that has set to help and the global economy, the GDP  in 2021 has to get back to normal, about 5.8% in positive sign.

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The impact of the COVID-19 outbreak on the global economy.

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The impact of the COVID-19 outbreak on the global economy.