Economic shutdowns and containment measures to stop the spread of COVID-19 have caused a sharp decline in global economic activity. The pandemic is sending the world into a recession that is much deeper than the contraction that followed the global financial crisis. Normal activity will be restored only gradually because economic structures will be damaged and creating systems of effective testing and tracking of infected individuals will be difficult. For 2020 as a whole, global economic output is likely to decline 3½ percent. The depth of the recession and speed of recovery in individual countries will vary depending on the strength of their economies going into the crisis, their ability to put effective policies in place to contain the virus, and their exposure to trade and commodity price shocks.
Aggressive actions by central banks and fiscal policymakers should help temper the downturns. Even so, households and small businesses in many countries may suffer income losses and damage to their balance sheets that impede the recovery.
This PIIE Chart was adapted from Karen Dynan’s presentation at the April 10, 2020 event, Global Economic Prospects: Spring 2020.