BAKU, Azerbaijan, March 27
Trend:
In order to prevent the global crisis caused by the coronavirus pandemic, it is necessary to actively use the resources of development banks, relying on high capitalization and support from the founding states, President of the Black Sea Trade and Development Bank (BSTDB) Dmitry Pankin told Trend.
Pankin said that at the moment, the world is moving to a global crisis that is affecting all countries.
“If the bloated financial sector was the culprit of the 2008 crisis, now the prime cause is the reducing demand and investment in the real sector of the global economy. The measures introduced in different countries to restrict the movement of people and block economic activity caused a serious blow to investment activity around the world. There was, so to speak, a psychological failure, the BSTDB president noted.
He pointed out that until the point of non-repayment is not passed, the crisis is reversible.
“To do this, removing restrictions on economic activity, and restoring the trade is needed. Otherwise, closure of production enterprises will be added to today's measures, and then a chain reaction can lead to completely unpredictable consequences. The most decisive, will be the next two weeks,” Pankin said.
“If the market is given a signal that in the coming months the world will be able to return to business activity, if hysteria with coronavirus ceases, then an easier recovery of the world economy can be expected. But for now, panic rules the economy,” said the president.
He also noted a typical scenario in situations where panic rules the economy.
“It is no secret that in a situation of uncertainty, investors prefer to maintain liquidity rather than investing in projects. In order for the economy not to freeze while the commercial sector is in a daze, it is necessary to actively connect the resources of development banks, relying on high capitalization and support from the founding states. In comparison with the total volume of lending by the private sector, the resources of development banks are not so significant,” said Pankin.
However, the conditions under which development banks lend to projects and their diplomatic resources in resolving international disputes are an undeniable advantage, especially in times of turbulence, the expert noted.
“The very activation of international development institutions will give the markets a signal that it is time to get out of the ambush. With their credit resources, they contribute to the revitalization of economic activity, implementing programs for debt restructuring, support for industries,” Pankin said.
Pankin noted that the BSTDB, like many other international development institutions, has already begun discussing measures to build up the project portfolio for anti-crisis purposes.