As coronavirus global deaths top 200,000 governments take reopening steps, Airbus is “bleeding cash”

CORONAVIRUS ALERT 4/27/2020

The Atlantic Council’s Coronavirus Alert is a regular summary of policy, economic, and business events around the emergency. To stay updated, sign up to the Coronavirus Alert here.

In top stories today:           

  • As global deaths from coronavirus exceed 200,000, governments worldwide take tentative steps to reopen their economies and try to ramp up testing to get a clearer picture of the route ahead. From bad loans to a shift in emerging-market investments, the economic impact of the pandemic looms large.
  • QUOTE:  “The economy is just us,” said Betsey Stevenson, an economics professor at the University of Michigan, The New York Times reported. “How much would we each be willing to give up to stay safe? If we open tomorrow, few are going to be willing to take the risk of engaging fully in the economy. Who wants to be the guinea pig who tests how dangerous going to a crowded restaurant still is?”
  • Global deaths from coronavirus surpassed 200,000 on April 25, of which more than half have been reported by the United States, Spain, and Italy, Reuters reported. That compares with an estimated 400,000 deaths annually from malaria, among the world’s most infectious diseases, the newswire added.
  • Spain, set to release a detailed plan on April 28, will take a cautious approach to reopening its economy, the Associated Press (AP) cited Prime Minister Pedro Sanchez as saying. Children under fourteen were allowed to leave their homes on April 26 after six weeks inside, AP said. France and Greece will also outline their plans to ease restrictions that day, AP reported.
  • As Italy slowly prepares to lift its own lockdown, the country chose US healthcare company Abbott Laboratories to supply 150,000 blood testing kits, Reuters reported. Authorities worldwide are stepping up broad-based systems of testing as they try to relax restrictions put in place because of the pandemic, the newswire added.
  • The death toll from coronavirus may be nearly 60 percent higher than official counts show, the Financial Times said, citing its analysis of fourteen countries’ overall fatalities during the outbreak.
  • UK Prime Minister Boris Johnson, back at work after convalescing from coronavirus, said the country faces its moment of maximum risk in the coronavirus outbreak, adding that he refused to relax the lockdown too soon as that would waste the progress against the disease made so far, the BBC reported.
  • Volkswagen, the world’s largest automaker, restarts production at its Wolfsburg factory in Germany on April 27, the latest European carmaker to do so, Reuters reported. But it’s not all plain sailing. A labor union representing workers at Renault’s factory in Flins, near Paris, urged workers not to go back to work on safety grounds before May 11, when France has said it will start to ease restrictions, whereas the automaker has asked employees to return starting on April 28 and 29, the newswire also reported.
  • Some form of social distancing will stay in place during the summer, Deborah Birx, the White House’s coronavirus task force coordinator, said on April 26, The Washington Post reported. It’s the latest example of contradictory signals from state and federal authorities but also within the Trump administration, the newspaper said. Vice President Mike Pence said last week that “we will largely have this coronavirus epidemic behind us” by the weekend of Memorial Day at the end of May, the Post said.

ECONOMIC IMPACT

  • The woes of the airline industry continue as global lockdowns see demand for air travel all but evaporate. Plane-maker Airbus is “bleeding cash” and needs to cut costs quickly to adapt to an industry that’s shrinking drastically, Bloomberg cited CEO Guillaume Faury as telling workers in a letter sent on April 24. US competitor Boeing is set to cut production and jobs in the coming days, the newswire said.
  • Loan-loss provisions will take center stage as European banks post first-quarter results this week, the Financial Times reported. UK lender Barclays, for instance, hasn’t faced the possibility of so many loans going unpaid in its 123-year history, the newspaper said.
  • The global economy may contract by 4 percent this year because of coronavirus, Bloomberg reported, citing a Bloomberg Economics forecast that assumes recovery will start in the second half of 2020. That’s based on “optimistic assumptions about both the outbreak and the recovery,” the newswire cited Tom Orlik and Jamie Rush as writing in a report.
  • A dozen economists predict that the European Central Bank (ECB) will start buying more risky debt, and most of them think the bank will also expand its bond-buying program in response to the coronavirus crisis, the Financial Times reported. The ECB’s governing council is scheduled to meet by videoconference, a first for them, to discuss monetary policy on April 30, the newspaper said.
  • The Nikkei Asian Review publishes an interview with Tadashi Yanai, Chairman and CEO of clothing retailer Uniqlo, who urged companies to come up with better ways to continue operations during the coronavirus pandemic. Shutting down economies completely will make a recovery longer and more painful, it cited him as saying.
  • QUOTE: “Maybe this pandemic isn’t an interlude, but a reset,” Andreas Kluth wrote on the website of Bloomberg. “My guess is that it’ll amount to a great simplification. A simplification of our lives, priorities, schedules, memberships, finances, relationships and maybe even world views. But also a simplification of our societies.”

EU-CHINA RELATIONS

  • China denied claims it’s spreading disinformation about coronavirus after a European Union (EU) report said there was “significant evidence” of covert operations by Beijing on social media, Reuters reported. China complained to the EU at least three times that bilateral relations would be harmed if the internal report accused it of spreading coronavirus propaganda, the Financial Times said on April 26. The EU softened its criticism of China following “heavy pressure” from Beijing, The New York Times reported on April 24.  
  • “Coronavirus infects China-US relations as blame game over pandemic intensifies,” runs a headline in the South China Morning Post. The article examines the outlook for bilateral relations, including the possibility that the impact of and response to the coronavirus crisis will push the two nations into a “new Cold War,” as the newspaper puts it.
  • China proposed a new way for medical goods makers to get export approval, which could speed up delivery to the US and elsewhere of face masks, test kits, and other medical equipment needed to fight coronavirus, The Wall Street Journal reported. Manufacturers can apply for the green light to export via an industry association rather than Chinese medical-product regulators, the newspaper said.

EMERGING MARKETS

  • The Financial Times leads its world coverage with the economic collapse triggered by coronavirus in Latin America and the Caribbean. Almost twenty-nine million more people will fall into poverty in the region this year, a setback of ten years in efforts to reduce inequality, Alicia Bárcena, head of the United Nations’s Economic Commission for Latin America and the Caribbean, said in an interview, the newspaper reported.
  • READ MORE: “We need financial support from the international community to address the health emergency and the famine, as well as water and energy supplies so we can stabilize the situation inside the country,” said Venezuela’s Interim President Juan Guaidó, the Atlantic Council’s David A. Wemer wrote.
  • Mexico’s President Andres Manuel López Obrador released a decree with several austerity measures. Among others, the provisions include 1) a 25 percent voluntary salary reduction (in a gradual manner) from medium and high-ranking officials and no end-of-year bonuses; 2) a 75 percent cut of the general services and supplies budget; 3) eliminating ten undersecretaries positions, but without laying off the personnel; and 4) closing public buildings and offices with the exception of those essential to the public and require in-person assistance. Some thought leaders have questioned the decree’s legal grounds and the ability to deliver some of the intended goals such as the creation of two million jobs. 
  • Even as investors withdraw money from more risky emerging-market economies during the coronavirus crisis, there’s been continuing appetite to buy bonds issued by the most creditworthy developing nations, The Wall Street Journal reported, citing Dealogic data.
  • Prisons from Brazil to Colombia, Iran, and Turkey have released hundreds of thousands of inmates as correctional facilities have become breeding grounds for coronavirus, The New York Times reported.
  • Crude-dependent economies in the Middle East are scrambling to face the hit to state budgets following the historic crash in oil prices as the coronavirus pandemic led to a collapse in demand, the Associated Press (AP) reported. Several of the countries already face explosive social unrest, AP said. Iraq plans to cut social benefits, Saudi Arabia will probably have to delay mega projects, while the fragile economies of Egypt and Lebanon contend with less money sent home from their workers in the Gulf, AP reported.
  • READ MORE: “Afghanistan is already on the path to becoming a new epicenter of this global pandemic,” wrote Sahar Halaimzai and the Atlantic Council’s Marika Theros. “A coordinated plan of action, grounded in a public health perspective and which prioritizes pausing the violence, is necessary in order to save lives.”
  • QUOTE: “We should not be trapped into over-confidence and nurse the belief that coronavirus has not reached our city, our village, our streets, our office,” Indian Prime Minister Narendra Modi said in an April 26 radio address, Reuters reported.

RESOURCES:

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