| 1) In what scale can we expect the economic slowdown to be? In the 2 digits. A working day weights between around .2% and .5% of annual GDP. 2) Will this be as bad as the 2008 recession? No. Entirely different. Both supply and demand contraction are implied by the rational choice of social distancing. In principle, there is no reason, other than mental habit, to think that a GDP loss would be a bad thing in itself. The overall effect could be much worse depending on the death and sickness toll. 3) What kind of economic climate can we expect for the next one year? Economic climate would improve with: - a quick inexpensive testing solution, which would hopefully allow immune workers to resume activity
- an effective therapy, which would allow working age population to resume social interaction and working
- a vaccine (probably not a relevant condition for the coming year) So the answer depends on any of these happening during the coming year. 4) What will governemnts across the world do to overcome the crisis? Very difficult to predict, not even knowing who will be the President of the US. Writing from a European perspective, I hope the current talks of a common unemployment insurance would spark a common fiscal policy in the aftermath, but I would not bet much on it. The proposal that I find the most convincing for a here and now policy to pave the way to recovery is ‘helicopter money’ as articulated, for instance, by Jordi Galì: https://voxeu.org/article/helicopter-money-time-now |