The future of the global economy in the post COVID-19 era - JICA President KITAOKA Shinichi talks with Director HORII Akinari of the Canon Institute for Global Studies -

On July 16, JICA President KITAOKA Shinichi had an online discussion with HORII Akinari, director of the Canon Institute for Global Studies and former assistant governor of the Bank of Japan. This dialogue was conducted as part of a research project entitled "International Cooperation in the Post-Corona World" launched by JICA, designed to comprehensively examine the future of the world and international cooperation through a series of dialogues between President Kitaoka and intellectuals inside and outside Japan.

At the beginning, Mr. Horii gave a presentation, from the viewpoint of the international economy and finance, responding to the following three key questions of the research project:

1. What lessons can we learn from the COVID-19 pandemic?
2. What will the world be like after COVID-19?
3. How should Japan and JICA contribute to the building of a better world?

Mr. Horii first quoted the latest IMF World Economic Outlook, which suggests that in a baseline scenario, global economic growth would decline by about 5% in 2020 and then turn upward in 2021, while the figure will fluctuate depending on the development of infections and lockdown policies in the future.

Next, Mr. Horii pointed out that the following four trends will accelerate and affect the global economy:

1. changes in globalization such as reorganization of supply chains,
2. acceleration of digital transformation (DX),
3. expansion of government intervention in both monetary and financial sectors, and
4. intensification of the US-China conflict.

He predicted that deflation might occur in the short term because of decline in demand. Following this, in the medium term, demand suppressed under the pandemic could recover supported by economic stimulus measures while stagflation (rising inflation combined with high unemployment and stagnant demand) might occur if the efficiency of supply is not promoted by DX.

Mr. Horii and the members of the study group then exchanged views on the impact resulting from the absence of a country that has leadership in international financial stabilization and the prospect of US-China decoupling.

Mr. Horii's presentation and discussion with him reminded us that the future of the global economy is difficult to foresee because it will vary greatly due to uncertain factors such as the development of the COVID-19 infection and government countermeasures. The study group reaffirmed the importance of discussing the most likely future outcomes and measures to cope with them.