THE DEEP ECONOMIC FALLOUT FROM GLOBAL DISTANCING
The global spreading of the Corona virus is keeping the world in suspense. Global confirmed infections exceed.
- Widespread shutdowns amid the Covid-19 epidemic are set to send the global economy into contraction by at least 4% this year, the deepest recession since WWII. The euro area economy will be hit particularly hard (-8%).
- The unprecedented slump in activity in the first half of 2020 may be followed by a rebound from H2 onwards. But it will take until 2022 or beyond for advanced economies to recoup pre-crisis levels of activity.
- Risks remain clearly skewed to the downside. A prolonged lockdown would deepen the 2020 contraction; further waves of infections would result in renewed restrictions, which may delay the recovery even into next year.
- With high uncertainties, rising unemployment and impaired corporate balance sheets dragging on demand for longer, subdued price pressures will prevail this year and next. Soaring public debt levels, ultra-accommodative monetary policies and the threat of deglobalisation may pose upside risks to inflation only in the medium to longer term.