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Post-Lockdown Economy: The Challenging Recovery Ahead

August 2020

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.

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Key Findings

COVID-19 has caused the global economy to collapse

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.

In the baseline scenario, social distancing effects gradually subside in the second half of 2020

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.

The Great Lockdown was a massive shock to labour markets and public finances

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.

Kerb-side pick-up adds new dimension to physical stores

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.

Introduction

Scope
Key findings
The global economy and COVID-19
In our baseline view, the pandemic slows in the second half of 2020
Three scenarios examine the impact of a more severe outbreak
Our view in short
Forecast real GDP growth in 2020 under different scenarios

Economic Outlook

Global economy will contract sharply in 2020
US economic outlook continues to deteriorate
China started the economic recovery from COVID-19 downturn
Eurozone to take at least until 2023 to reach the pre-crisis output
India’s real GDP to drop by 4.2% in 2020
Japanese debt to rise as government tries to kickstart the economy
The UK economy faces risks on two fronts
Global economy will recover to pre-crisis growth trend

Labour Markets

Labour markets lag the financial markets recovery
The labour market in the US is slowly starting a long recovery
Automation gets a boost but this could be short-lived

Public Debt Levels

Decisive fiscal stimulus will translate to record-levels of debt
G20 public debt to surpass World War II levels
Emerging markets are likely to struggle with skyrocketing debt

Reopening of Cities

Retail: kerb-side pick-ups add new dimension to physical stores
Hotels and catering: increasing the use of outdoor space
Urban mobility: less public transport, more cycling
Work: remote work may become the new norm

Conclusion

Key takeaways
Key takeaways for businesses and governments

About Our Analytic Capabilities

About Euromonitor International’s Macro Model
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