COVID-19 International Developments: Daily Scan, April 6, 2020
Prerna Gandhi, Associate Fellow, VIF
Economic
Remittances flows around the world are set to shrink, damaging recipient economies

Analysts say a big shock lies ahead for economies that rely heavily on remittances, including India and the Philippines. It will hit on two fronts: returning workers are expected to add to swelling unemployment rolls, and the revenues they used to contribute — vital foreign currency earnings — will fall. Some factors will cushion the blow on workers and their home economies; the rally in the US dollar will increase the value of what they send home in local currency terms, at least in the short term; many Gulf currencies are pegged to the dollar. “We are seeing a sharp depreciation of Asian currencies against the US dollar,” said Yasuyuki Sawada, chief economist for the Asian Development Bank. “So even if the foreign currency amount of remittances decline, their Asian currency value may increase.”

Coronavirus Pandemic Deepens Labour Divide Between Online, Offline Workers

The severe job losses reported this week provide a split-screen snapshot of a labour force increasingly divided between the can and can-nots—based in part on the ability to work online. The employment report released on April 3 showed employers slashed 701,000 US jobs last month. About two-thirds of the drop occurred in leisure and hospitality, mainly in food services and drinking places—which includes restaurants and bars.

Coronavirus lockdowns shave off almost 30 per cent of entire US economy — Moody's

As stay-at-home orders to battle the coronavirus are effective in most states, the virus-related restrictions have already shed 29 per cent of US daily output, Moody's Analytics warns as cited by the Wall Street Journal. According to Moody's study, which was carried when 41 states shut down non-essential businesses, California alone lost $2.8 billion a day, equivalent of more than 31.5 per cent of the state's daily gross domestic product (GDP). The drop of output in 15 other states, responsible for almost 70 per cent of all the US daily GDP, is $12.5 billion, while 30 other states together with Washington DC are losing a total of $4.9 billion of GDP per day. The economic fallout (in terms of output drop) of the coronavirus crisis has already turned worse that the consequences of the 9/11 terrorist attacks, according to the agency's data. As the result of three weeks of government-imposed closures, US output tumbled by around $350 billion, while the attacks had cut it by an estimated $111 billion in current dollars.

Asian firms rush to meet $69 billion in second-quarter debt refinancing

Companies in the Asia Pacific need to raise a near record $69.3 billion to refinance their existing borrowings in the second quarter, Refinitiv (a financial solutions company) figures show, as the region’s capital markets remain turbulent due to the coronavirus pandemic. The level of U.S. dollar corporate debt due to mature in the region, including Japan and China, is the second highest on record and only slightly behind the $71.4 billion that was due during the same time last year. Some of China’s largest state-owned enterprises are the leading contenders to refinance debt with oil giant Sinopec Group, which has a 5-year bond worth $2.48 billion maturing in April while power utility State Grid has a three-year $898.5 million bond expiring at the same time, according to Refinitiv. A record $220 billion has been raised in the U.S. corporate credit market in the past fortnight, while just $2.57 billion has been raised in Asia during that same time, Refinitiv data shows.

Natural gas drillers get share price boost as oil price falls

Some gas futures prices are up almost 10 per cent since the end of February over the same period that US crude oil has more than halved. The reason: billions of dollars of capital spending cuts announced by US shale oil companies are likely to lead to lower output of so-called associated gas, natural gas produced as a by-product of wells drilled mainly for their oil. By some forecasts, total US gas production could be down more than 10 per cent by the end of next year, with significant consequences for companies involved in transporting and exporting the commodity. The prospect of higher prices has provided a modest boost to exploration and production companies that drill mainly for gas. While the economic damage from coronavirus is likely to hit commercial and industrial demand for natural gas, demand for the fuel for heat and electricity generation is relatively steady.

Low oil prices drag MENA economies to collapse

Low crude prices are seriously threatening most oil-producing countries in the Middle East and North Africa (MENA) who need higher oil prices to balance their budgets. Nigeria needs a breakeven price of $144 per barrel of Brent crude on average to balance its government balance this year, while Bahrain requires $96 a barrel, according to data from global rating agency Fitch Ratings. Saudi Arabia, OPEC heavyweight and the world's largest crude exporter need a breakeven of $91 per barrel, while Oman needs $82 a barrel, Abu Dhabi requires $65 per barrel and Qatar needs $55 a barrel, the data shows. While Algeria needs $109 per barrel of average Brent crude in 2020 to balance its budget, Angola has a breakeven price of $55 per barrel, and the United Arab Emirates (UAE) needs $70 a barrel, according to International Monetary Fund (IMF) data. The data shows that Venezuela and Libya each need around $100 per barrel to balance their budgets this year, while Iraq stands at $60 a barrel and Iran is at a whopping $195 per barrel. For non-OPEC countries such as Russia, Mexico and Kazakhstan, an average Brent crude price of $42 per barrel, $49 per barrel and $58 per barrel are needed this year to balance their budgets.

US banks defend dividend payments during pandemic

US banks’ annual capital plans, due to be submitted to the Federal Reserve on April 6, are expected to include proposals to continue paying dividends, reinforcing comments from prominent bank chief executives in recent days, according to people familiar with the situation. The bankers, including Goldman Sachs boss David Solomon, Morgan Stanley boss James Gorman and Citigroup chief Mike Corbat, argued that they had the means to continue paying dividends and that cutting them would be “destabilising to investors”. “That’s what creates a financial crisis: when dividends start to be ratcheted lower that shakes confidence”, said Marty Mosby, a veteran banks analyst at Vining Sparks. The top 20 US banks have more than $200bn in excess capital and make more than $50bn in profits before loan losses every year, according to analysts at Barclays, giving them ample room to cover dividend pay-outs even if loan losses across the group were as high as the $175bn they recorded in 2009.

OPEC+ emergency meeting to be held on April 9

The members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies willing to support the tumbling oil market have postponed their emergency talks till April 9. The delay was confirmed by the Azerbaijan Energy Ministry to Russian media on Saturday, one day after it had announced that the talks were set to be held on April 6. While it was earlier reported that the delegations needed more time to figure out how to boost crude prices, Bloomberg stated that harsh statements exchanged by Moscow and Riyadh, whose rift led to the initial collapse of more than a two-year oil accord, added fuel to the fire. On April 3, Russian President Vladimir Putin said that Moscow is ready to support the cuts of up to 10 million barrels per day, if other players join in. He added that Saudi Arabia’s withdrawal from the agreement was meant to get rid of US shale producers. The kingdom was quick to refute the accusation, calling it “fully devoid of truth.”

Chinese banks face double threat of more bad debt, lower margins amid worsening coronavirus pandemic

After posting better-than-expected results for 2019, Chinese banks face the prospect of worsening asset quality and pressure on profits this year, as the coronavirus pandemic takes a toll on the global economy, bankers and analysts said.Since China plays an outsize role in the global supply chain, Chinese banks are likely to take a hit should the global economy contract this year. “If the global coronavirus is not contained by the third quarter, this will have great impact on the Chinese economy [and] on Chinese banks,” Zhang Gengsheng, executive vice-president of China Construction Bank (CCB), said during a teleconference held this week to discuss the bank’s annual results.Both CCB and the Industrial and Commercial Bank of China, the largest lender globally by assets, said about 5 per cent of their small and medium-size business borrowers had requested an extension of loan repayments. Last month, regulators announced special measures allowing borrowers affected by the outbreak to extend their loan repayments up to the end of June.

Strategic
Vietnam's lost year: Coronavirus dampens ASEAN diplomacy

Vietnam, which holds the regional group's annually rotating chairmanship this year, has postponed the 36th summit of the 10-member Association of Southeast Asian Nations to the end of June, which was originally scheduled to take place on April 8-9 in the central Vietnamese resort of Danang. The ASEAN Summit, the group's biggest decision-making event, is held twice annually, usually in April and November. The spring summit, in which only ASEAN members take part, is where the bloc discusses its diplomatic agenda and strategy to prepare for the larger meetings in autumn such as the East Asia Summit.The group normally holds nearly 1,000 meetings a year, highlighted by the biannual summit.Vietnam's ASEAN chairmanship in 2020 has significant geopolitical implications for the country and ASEAN as a whole.When it last held the reins in ASEAN back in 2010, Vietnam pulled off a number of diplomatic feats, including bringing the US and Russia into the East Asia Summit, and hosting the inaugural ASEAN Defense Ministers Meeting-Plus.RCEP is also held as a priority by ASEAN to stem a protectionist tide that could grow due to the pandemic.

Turkey to minimise troop movements to lower coronavirus risks

Turkey has said it would minimise its troop movements in operation zones in neighbouring Syria as part of the measures to fight the coronavirus pandemic, as the Turkish death toll and infections continue to rise.In the latest step, the defence ministry said it had set up a new unit to battle the spread of the disease.Troops deployed in Syria would now enter and exit operation areas only with the permission of the head of the army, the ministry said. "Thus, the movement of staff and troops is minimised, unless it is mandatory," it added.Turkey's military backs Syrian rebels in the north western Idlib region where it ramped up a deployment earlier this year. Fighting has calmed since Ankara agreed upon a ceasefire with Moscow, which backs Syrian government forces, last month.

Violence continues unabated in Mexico's drug wars despite coronavirus

The global coronavirus lockdown is making it hard for Mexican drug cartels to operate. With borders shut and limited air traffic, cartels are turning on each other. Since Mexico introduced its first safety measures to curb the virus outbreak on March 23, 646 people have been murdered, according to official statistics. Last year, an average 95 individuals per day died a violent death in Mexico.Mexican media have reported that some vendors are now calling on the municipality to dispatch the National Guard to guarantee their safety.The lockdown has also dried up the supply of imported Chinese chemicals needed to produce synthetic drugs. Prior to the virus outbreak, for example, China's Hubei province was a major exporter of fentanyl, an opioid. But now, Mexico's big Sinaloa and Jalisco Nueva Generacion (CJNG) drug cartels are lacking the raw materials to produce drugs, as insightcrime.org reports. Javier Oliva, a professor of political science at the National Autonomous University of Mexico, expects tensions between cartels to grow amid the coronavirus lockdown, and also predicts a spike in street crime and burglaries.

US Military Seeks More Funding for Pacific Region after Pandemic

United States military officials have outlined a spending request to bolster deterrence against China after the coronavirus pandemic ebbs, a sign of how national security leaders are already studying ways to shore up the country’s standing in the Asia-Pacific region once the outbreak ends.A report from the U.S. Indo-Pacific Command, delivered to Congress last week, calls for $20.1 billion in additional spending between 2021 and 2026. The funds would be spent on new radar warning systems and cruise missiles, and would also pay for more exercises with allies, deployments of additional forces and new intelligence-sharing centres.

UN Secretary-General: Domestic violence on rise during pandemic

United Nations Secretary-General Antonio Guterres says there has been "a horrifying global surge in domestic violence" in recent weeks as fear of the coronavirus pandemic has grown along with its social and economic consequences. The UN chief, who appealed on March 23 for an immediate cease-fire in conflicts around the world to tackle COVID-19, said in a statement on April 5 that it is now time to appeal for an end to all violence, "everywhere, now."The secretary-general said in some countries, which he didn't name, "the number of women calling support services has doubled."At the same time, he said, health care providers and police are overwhelmed and understaffed, local support groups are paralyzed or short of funds, and some domestic violence shelters are closed while others are full."I urge all governments to make the prevention and redress of violence against women a key part of their national response plans for COVID-19," Guterres said.

US braces for ‘Pearl Harbour moment’ after 1,200 deaths in a day

Americans braced themselves for what the nation’s top doctor warned would be “the hardest and saddest week” of their lives as more than 1,200 people died of coronavirus complications in the United States on April 4. Johns Hopkins University, which has been keeping a running tally of global coronavirus numbers, said on April 5 evening there are at least 337,072 confirmed infections in the US with 9,633 deaths.“This is going to be our Pearl Harbour moment, our 9/11 moment,’’ US Surgeon General Jerome Adams told Fox News before the new figures were published.

Africa to lose $200B this year due to COVID-19: McKinsey

Africa is expected to see a dip in its GDP growth rate of between five and eight percentage points, due to the novel coronavirus outbreak, a study warned. "Africa's economies could experience a loss of between $90 billion and $200 billion in 2020," according to a study entitled Tackling COVID-19 in Africa, which was released last week by global auditing firm McKinsey & Company's experts. Noting that these losses stemmed mostly from cuts in private spending and widespread travel bans in Africa, as well as supply-chain disruptions, lowered demand for the continent's non-oil exports, and delays or cancelations foreign investments caused by the on-going epidemic, the report argued that roughly 15% were due to "oil-price effects."The report advised African governments and development partners to "explore several far-reaching solutions, such as stimulus packages or economic development plans "modelled on the Marshall Plan that provided aid to Europe following World War II." Further, a liquidity fund for the private sector could be established to offer grants, loans or debt for equity swaps to "support businesses and limit job losses."

Medical
Fewer deaths in Veneto compared to Lombardy offer clues for fight against virus

When, at the end of February, Lombardy and Veneto recorded Italy’s first local cases of transmission of coronavirus, the two regions quickly erected road blocks, establishing Europe’s first lockdown and a precedent for the rest of the continent. Lombardy has had a death rate of 17.6 per cent, while Veneto’s stands at 5.6 per cent. Though virologists caution that the percentage death rate is closely tied to the level of testing, they also attribute the gap to other factors, such as Veneto’s reluctance to hospitalise compared with its neighbour. The number of diagnosed patients who were taken in hospitals for clinical treatment at the start of the outbreak was about 65 per cent in Lombardy, Prof Palù said. This compares with 20 per cent in Veneto, where the majority were told to stay at home unless urgent care was required.“There were different instructions given to the sick by the different regional health authorities,” he said. “Yes, there has been more testing in Veneto but people were kept at home and not taken into hospitals. The more patients you admit to the hospital, the more cases you get. You create the outbreak as at the start nobody was taking care of sampling the doctors or nurses, [so] you were taking home the infection.”

Australian Scientists see anti-lice medicineas potential COVID-19 cure

In a report by the Daily Mail, Australian researchers from the Monash University in Melbourne, found that ivermectin could impede the replication of the SARS-CoV-2 virus in a laboratory setting in under 48 hours, according to the study that was published in Antiviral Research. Healthy cells were infected with the SARS-CoV-2 virus, or the novel coronavirus, for two hours, and then ivermectin was injected. The test conducted by the Australian researchers showed that even a single dose of the anti-parasitic drug was enough to significantly reduce viral RNA during the first 28 hours, then wiping out 99.8% by 48 hours. On the third day, coronavirus was eliminated entirely. Although the researchers are not yet sure how exactly ivermectin can kill coronavirus, they believe that the drug paralyzes the virus and "overwhelms its nervous system," which then impedes its replication process.Ivermectin was discovered in the 1970s but became widely used in the '80s as an effective medicine against head lice, scabies, and other parasitic infections, and it is available in pill, shampoo, and lotion.

For Further Reading:

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