MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, April 2020

The pandemic of Covid-19 has shown as a shock we have never experienced at least in the last 100 years. The disturbance brought by Covid-19 is touching all aspects of life globally.  Besides risking the life of millions of people, Covid-19 is also bringing an economic turmoil not only at the individual level but also on the national and global scale. The turmoil caused by the outbreak has shocked the financial market due to the increased in volatility and uncertainty, which caused global investors to shift their portfolio from risky assets to safe-haven assets. This behavior of “flight-to-safety” has triggered capital outflows from emerging markets, induced the shortage of liquidity in FX markets and threatening currencies’ stability. Furthermore, the disruption of supply chain and credit crunch in the banking sector might pose a risk of goods supply shortage during the Ramadhan and Eid period which could  potentially translate into high inflation due to supply shock.

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