The Coronavirus (COVID-19) pandemic is the harshest global crisis since World War II, and will have a long-lasting impact on economies around the world. Countries are entering historic recessions, public debt will skyrocket and labour markets will struggle for years. Economies are reopening but many risks remain. Infection rates might rise, with new pandemic waves, vaccine development might be slow, or economic policy response might not reach businesses and individuals in need.
In 2020, global real GDP is forecast to contract by 3.0-6.0%. Without a global second wave of the pandemic, the global economy will start to recover in 2021, and grow by 5.3%. Nevertheless, global economic activity levels in 2022 will still be around 4.4% below the pre-COVID-19 forecast. Overall, the shape of the economic recovery depends on the path the pandemic takes, and significant uncertainties remain regarding this.
Under our baseline forecast scenario, we model only one main global wave of the pandemic, with possible local second waves. The scenario forecasts an effective vaccine or treatment for COVID-19 becoming available around the middle of 2021. Afterwards, the global economy returns to pre-crisis growth levels – unlike after the Global Financial Crisis of 2009.
Countries acted in different ways to support economic demand following the massive shock to labour markets, which will lead to substantial rises in public debt levels. European economies subsidised wages for furloughed employees, artificially keeping unemployment rates low and hoping to reduce job search difficulties after the crisis. The US government temporarily increased unemployment benefits, owing to a substantial increase in unemployment.
Companies including Amazon, Lowes, Home Depot and Walmart in the US have seen a surge in kerb-side pick-ups during the pandemic. It has helped to make shopping quick and has reduced prolonged contact with people, and has shown the value for businesses of having both a physical and digital presence.
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