Coronavirus and Carbon Transition for Developing Economies

Abstract

The coronavirus, (COVID-19) has spread to several continents and Italy has in recent days become Europe’s worst-affected country. Whilst the humanitarian costs leave little to desire, the economic impact has halted manufacturing supply chains across China and the world, caused imports of crude oil to fall by 25%, global economic activity to slow and oil prices to hit 31-$33/bl. In the meantime, central banks have cut interest rates in an attempt to reduce the adverse effects of a slowing global economy but commodity exporters such as Nigeria, South Africa and Cameroon will likely bear the brunt of weaker demand. Rather than stimulate domestic economies via interest rate cuts, central banks should emphasise the need for targeted fiscal reforms that prioritise higher value-added products such as green technologies, consumer and non-consumer products, intermediate products and components for industrial machinery. Such an approach will increase the number of people employed in formal sectors, reduce the impact of the virus on long-term economic growth whilst improving the pass-through from monetary policy to economic activity and inflation.

Keywords: COVID-19, corona virus, carbon emissions, growth, development, prosperity, informal sectors, humanitarian cost