The rapid escalation of the COVID-19 crisis may be setting the stage for a global recession. Economic policymakers have no time to waste in preparing a response – preferably one that makes full use of low and falling bond yields, below-target inflation, and the lessons of the last recession.
WILSON, WYOMING – The COVID-19 epidemic is accelerating, and as the new coronavirus approaches pandemic status, it is increasingly likely that the economic impact will be severe. Alongside intensifying public-health responses, governments must step in to mitigate the virus’s impact on growth, employment, and living standards.
There are three reasons to worry that COVID-19 will hit the global economy hard. First, regional and national travel restrictions will curb the flow of goods and services across borders and within countries. This is already happening in China, where growth forecasts for the first half of 2020 are being slashed. As the world’s second-largest economy and home to much of the global supply chain, China’s slowdown is already being reflected in large US and European companies’ (reduced) earnings forecasts.
Second, increased uncertainty will translate into reduced “big ticket” spending by households and small businesses. Holidays and business travel are already being reconsidered, as evidenced by the 200,000-plus airline cancellations so far this year. Auto and home purchases will likely follow suit. Before long, businesses will put off investment in structures, plant, and equipment, creating major negative ripple effects across the world’s economies.
WILSON, WYOMING – The COVID-19 epidemic is accelerating, and as the new coronavirus approaches pandemic status, it is increasingly likely that the economic impact will be severe. Alongside intensifying public-health responses, governments must step in to mitigate the virus’s impact on growth, employment, and living standards.
There are three reasons to worry that COVID-19 will hit the global economy hard. First, regional and national travel restrictions will curb the flow of goods and services across borders and within countries. This is already happening in China, where growth forecasts for the first half of 2020 are being slashed. As the world’s second-largest economy and home to much of the global supply chain, China’s slowdown is already being reflected in large US and European companies’ (reduced) earnings forecasts.
Second, increased uncertainty will translate into reduced “big ticket” spending by households and small businesses. Holidays and business travel are already being reconsidered, as evidenced by the 200,000-plus airline cancellations so far this year. Auto and home purchases will likely follow suit. Before long, businesses will put off investment in structures, plant, and equipment, creating major negative ripple effects across the world’s economies.