The COVID-19 pandemic is, first and foremost, a public health emergency, and our thoughts are with all those affected. The virus has spread to virtually every corner of the globe and is no longer containable. This has prompted governments to impose quarantines, travel restrictions and a variety of other measures in an attempt to minimize risks.
In today’s highly connected and globalized world, these risk mitigation actions have caused a major shock to the global economy. While China’s economy is expected to see positive growth overall this year, it will still experience a significant slowdown compared to recent performance. Given the level of disruption in Europe, most of the firms expect the Eurozone’s economy to contract significantly. Most of them also predict that the United States will experience neutral to negative growth in 2020, especially as gross domestic product (GDP) forecasts had already been tempered by trade war concerns and moderated expectations.
The full economic impact of the COVID-19 outbreak is currently unknown and will take some time to materialize. The nature of the response to the outbreak (a combination of extraordinary containment and financial assistance policies) initially raised hopes that most advanced economies would follow a V-shaped trajectory – a sharp downturn, followed by a rapid rebound. Given the scale and scope of social distancing and business closures, things look less clear-cut today. Much will depend on the duration of the drop in economic activity and the extent of any structural damage.