Statement
Covid-19: how bad will it be for the economy?
- Global economies are projected to continue crumbling with economic activity severely impacted over a period of a couple of weeks.
- Prices for vital commodities are predicted to decline, with oil expected to stay below $50 per barrel and gold prices anticipated to fall further.
- U.S. demand in China, as well as global demand for copper and iron ore, are expected to drop substantially.
- Unemployment claims are forecast to remain elevated following recent record highs, while businesses face high costs without revenue.
- Investors are expected to recalculate corporate profit and economic futures sharply downward, continuing to sell liquid assets such as large-cap S&P 500 companies.
- The retailing, entertainment, hotel, and restaurant sectors face the worst possible outcomes, while global production remains endangered by cross-border trade restrictions.
- Alternative supply chains are expected to take a very long time to rebuild, and few companies will resurrect existing chains until the economy stabilizes.
- Finished product demand is expected to remain very low in the interim, with the true extent of economic damage becoming clear only during the recovery phase.
- Economists are evaluating whether the recession will follow V-shaped, U-shaped, or L-shaped patterns, hoping Europe and America mimic China's V-shaped trajectory after lockdowns end.
- Unprecedented government responses totaling 200 billion euros, 330 billion pounds, and 2.2 trillion dollars are expected to provide short-term protections against economic damage.
- The pandemic is expected to persist for a long time, with year-long lockdowns potentially costing the U.S. and Eurozone one-third of their GDP.
- Models indicate that ending lockdowns in America would reduce economic damage but result in approximately one million additional deaths, forcing governments to weigh lives against economic loss.
- The scale of government reaction is expected to be unprecedented compared to the 75 years since the Second World War.