It is not surprising to foresee the aftermath of this pandemic, the economic crisis accompanied by a global health crisis. The world’s economy may take a dip like never before and here are some of the activities that may change the face of Central Banking.

By lending widely to businesses, states and cities in its effort to insulate the U.S economy from the coronavirus pandemic, the Federal Reserve is breaking century-old taboos about who gets money from the central bank in a crisis, on what terms, and what risks it will take about getting that money back and with large-scale purchases of the U.S, Treasury securities, the Federal Reserve is stretching the boundaries for what a central bank will do to finance soaring federal debt—actions that move it deeper into political decisions it usually tries to avoid.

Asia the next line up to change the Future of Monetary Policy

The Fed officials have come to the view that the events occurring in Asia have a crucial role in deciding the momentum of the economic future of the world, as a whole. Economists project that the central bank’s portfolios such as bonds, loans, and other securities may surge from $8 trillion to $11 trillion, nearly twice as much as the previous year’s $4 trillion.

The portfolio range accounts for nearly half the value of the US Economic output, which is close to twice the size reached after the 2008 Depression. The foreseeable future promises to exceed the aftermath of World War II and world economies are being pushed out of the edge.

Concentrating on the Asian Hemisphere, Australia is going to hit an all-time low in nearly 100 years. Australia has been successful in containing the outbreak of the COVID19 pandemic but its economy is unlikely to stay healthy amidst the chaos. Bloomberg Calculations anticipate this to be the largest contraction since the 1930s depression.

Economists expect three consecutive quarters of declining GDP with the Australian economy contracting by approximately 9% and shows no hope of a gradual recovery until the 4th quarter of 2020.

On the brighter side, the Indonesian Economy sees clear skies despite the pandemic. According to the Central bank, Bank Indonesia, the decline in reserves is mainly owing to the payment of foreign debts in an attempt to revive the status of the rupiah.

The rupiah has firmed against the greenback for the last several days and on Thursday it strongly appreciated by 1.99 percent to 15,880 against one US dollar, compared to 16,326.23 on Wednesday, according to data from a dealer. – AFP

The panic in the financial market has given birth to cautious investors who are unwilling to assume the risk and hold back on their liquidity as a form of safe haven, including emerging market currencies including the Indonesian rupiah. While most countries are considering resorting to the unholy Quantitative Easing, the Indonesian bank continues to retain its benchmark rate of 4.5% but it has been given the authority to buy government debt in the primary market.

The Philippines is also in line with buying government debt in an attempt to give the governments more fiscal power to battle the virus and shore up local currencies.

The purchasing of government debt is a commendable effort that has current account deficits that are vulnerable to a loss of appetite by global investors.

The pandemic is far from being over, as stated by the WHO chief and so is the burden on the global economy. We hope to see a gradual recovery phase in the 3rd and 4th quarters of 2020 as we accustom ourselves to a new sense of normalcy.

Also read: COVID-19 RECESSION WORSE THAN “THE GREAT DEPRESSION” FOR THE U.S.A?

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