The global economy is under the brunt of containment measures designed to stem the pandemic, with numbers of bankruptcies and public debts never seen before, but some economists are optimistic about a solid rebound after this storm.
The comparisons with the 2008 financial crisis are no longer strong enough, the figures are so gigantic.
Losses for businesses, number of unemployed, amount of stimulus packages in each country: the zeros line up, far exceeding what the world experienced a decade ago.
Now we have to go back to the Great Depression of 1929 to find equivalent orders of magnitude, according to IMF Managing Director Kristalina Georgieva.
“Global growth will become strongly negative in 2020”, and 2021 could turn out to be “worse” than 2020 if the pandemic were to last, she said on Thursday.
Extraordinary uncertainty reigns over the scale and duration of the crisis. Global growth will be significantly negative in 2020. We expect the worst economic slowdown since the Great Depression. https://t.co/36TVQNkaib #IMFmeetings # COVID19
– FMIactualites (@FMIactualites) April 9, 2020
Some economists, however, anticipate a rapid and solid rebound as soon as people can leave their homes and return to work.
Indeed, the consequences of this crisis are more like those of a natural disaster, such as a hurricane, than a traditional financial or economic crisis, said economists at the Regional Central Bank of New York.
“Recessions develop gradually over time,” researchers Jason Bram and Richard Dietz said on Friday.
In contrast, the coronavirus pandemic, which affected 1.6 million people worldwide and caused more than 100,000 deaths, “suddenly occurred, hitting the economy hard in a month”, they detail. Like a hurricane, it first hit the travel and tourism industries. But, unlike a natural disaster, it did not result in physical destruction, “which could facilitate a faster economic recovery,” they note.
Even with massive public spending, essential to allow a rapid recovery of the economy, “the job losses will be traumatic and the post-virus rebound (…) with a full recovery will take 12 to 18 months”, estimates for Grégory Daco from Oxford Economics.
But when should the economy start up again? While China has released residents of affected regions after more than two months at home, and European countries are starting to think about a timetable, President Donald Trump said it would be the decision the most important of his life.
“We will have to proceed slowly (…). And we’re going to have setbacks, ”said Karen Dynan, a former US Treasury official.
3.4% global decline in 2020
The United States, the world’s largest economy, was in a flourishing situation at the start of 2020, with unemployment at its lowest level in 50 years and growth that made European countries pale. But the coronavirus crisis turned the tide, and 17 million people went unemployed in just three weeks.
The economy should fall there by 20% in April, then again by 20% in May, warned Friday Karen Dynan, who expects a contraction of 8% for the year 2020.
For the entire globe, it expects a 3.4% decline, a more pessimistic forecast than those already published. It is much more enthusiastic for 2021, and expects a rebound of 7.2%.
She acknowledges, however, that many of her colleagues at the Peterson Institute – of whom she helped prepare the semi-annual forecast – do not share her optimism.
In the United States, the massive injections of cash into the economy will dig a deep hole in the finances.
Nothing is yet visible on the figures published Friday by the Treasury for the month of March. Spending is even lower than in the same month of 2019 and revenue slightly higher. The first consequences should appear in April.
(dpa / nxp)
Created: 11.04.2020, 07:29