Top banker says US economy needs to reopen to help rest of the world
World Bank's David Malpass fears coronavirus may have done more damage than the Great Recession
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The president of the World Bank says it’s important to global economic recovery that the U.S. and other major economies end their lockdowns originally imposed to reduce the spread of the coronavirus.
David Malpass told FOX Business' Gerry Baker during WSJ at Large that poorer countries after depending on it.
“The impact on the poor countries of the shutdown in the developed economies is severe,” he explained. “Because their livelihoods depend on the ability to interact with the developed world. So one of the things the world can do is try to have the advanced economies to reopen as quickly as they can.”
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President Trump’s former undersecretary of the Treasury for International Affairs and the chief economist at investment bank Bear Stearns -- which collapsed during the 2008 financial crisis – fears the current economic standstill has already done even more damage than the Great Recession.
“I think for many countries, it’s worse than 2008,” he pointed out. “That means their economy actually shrinks materially, a big shrinkage.”
Malpass worries about the long-term impact of that.
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“The problem is some part of that will be lasting,” he argued. “It might be a shrinkage that takes years to recover from.”
So how quickly will the global economy bounce back?
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“If the advanced economies can end the shutdown and allow some operation of their economies, that is going to shorten the pace to the global recovery,” Malpass noted. “And it’s really powerful. A big chunk of the world’s GDP comes out of the U.S., comes out of Europe, Japan and China, and all had a real slowdown.”
“I think for many countries, it’s worse than 2008. That means their economy actually shrinks materially, a big shrinkage.”
And Malpass thinks it might not be that difficult for those countries to do that.
“[A] critical factor is how does each country respond to the crisis in terms of settling the losses and getting on with their new production,” he said. “Many of the assets are still there: that means the buildings are there, the people’s knowledge -- how to farm, how to build things -- that’s all still existing."
Malpass believes once all those assets reopen, a good bit of the world's output might be able to reopen.