The response to the pandemic, involving governments imposing a range of lockdown measures, will inevitably have an enormous impact on economic activity around the globe.
On home shores, early data for the first quarter provides an indication of the economic damage, showing GDP fell by 2% in the UK, with the economy shrinking by 5.8% in March alone. An even larger decline was registered in the 19-country Eurozone, with output across the bloc dropping 3.8% in Q1. Italy and France plummeted into recession, with quarterly contractions of 5.8% and 4.7% respectively. In addition, the German economy also tipped into recession with GDP down 2.2% in Q1.
Preliminary estimates on the US economy suggest the record streak of expansion experienced since 2014 had ended, with a contraction of 4.8% in the first quarter.
Meanwhile, the world’s second-largest economy, China, shrank at an annualised rate of 6.8% during Q1. The Chinese authorities have abandoned setting a growth target, acknowledging the challenges facing its economy amid heightened international disquiet due to the fallout from the pandemic.
Ongoing uncertainty surrounding the virus and the likelihood of developing a successful vaccine, make it challenging to predict the future path of the global economy. A recent assessment from the International Monetary Fund (IMF), suggests we are facing the steepest economic downturn since the Great Depression. While the IMF has emphasised its predictions are marked by ‘a higher-than-usual degree of uncertainty’, it is forecasting a rebound in 2021, with the global economy expected to grow at a rate of 5.4% as activity normalises. They have stressed though, that if a second global wave did occur, that could effectively keep the world in recession for a second consecutive year.