As he was leaving for Beijing, the Chief Executive (CE) mentioned the Gross Domestic Product (GDP) figure for the second quarter. The official announcement is projected for next week, but the government gets those numbers first, as we might expect. Our GDP contracted by 67,8 percent. To put it more straightforwardly: our economy stood, in those three months, just below one-third of what it was in 2019.
As in the first quarter the corresponding figure was close to a half, we can understand the CE conclusion: “we cannot be totally optimistic.” If anything, that’s an understatement. Understandable, as it would be pointless (and unexpected) for him to underline the dark clouds hanging over the region. But an understatement, nonetheless.
Happily, if we can use the word nowadays, one should not be totally pessimistic either. Indeed, re-starting the main engine of our economy is the most pressing matter. We need to open paths for a recovery, however slow and protracted it may be. There are now some positive signals concerning the visa issuance and access policies for mainland visitors, and they come with a calendar. That is very much welcome.
Indeed, the future is, by definition, indeterminate. Still, we need to deal with that undefinition the best we can and prepare for the opportunities or challenges that we may somehow anticipate. People cannot live for long in a state of total uncertainty about what may lie ahead. And that includes plans and intentions of the political bodies whose policies will inevitably affect those opportunities and challenges, for better or worse.
The measures taken so far to mitigate the short-term effects of this recession are in line with the conventional approaches to similar circumstances. But the stimulus given to private consumption, namely, amounts to just a small part of families’ expenditure and is insufficient to prevent a decline in the overall figures. Moreover, as time goes by, the measures that have until now prevented a more noticeable degradation in the labor market will become unsustainable.
Reduced working hours and wages, mandatory vacations, and temporary layoffs will become increasingly permanent dismissals. Besides the social tensions that may arise, that situation will bring additional pressure to the economy and set the stage for further demand contractions down the line.
Therefore, reestablishing the ‘supply’ lines to fuel our main engine cannot come too early. That must be done minimizing the risks of re-igniting a health scare, certainly. But that is precisely our central policy challenge.