Lessons from past pandemics: strict and swift responses are key
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One thing is for sure: the global economy will shrink in 2020 due to COVID-19. While past pandemics provide a useful historical precedent, the current economic environment is too different to draw strong analogous conclusions. The ensuing recovery from this year's events will be protracted, and government support to ensure higher growth paths are achieved is vital.
- We have revised our global growth outlook for 2020 to -3.8% and estimate a cumulative loss to global GDP of about USD 12 trillion over 2020-21. Western economies will be most affected.
- The cost of COVID-19 will be roughly -6.4% of global GDP in 2020.
- Past pandemics provide useful historical precedent, but the global economic environment is too different now to draw meaningful analogous conclusions.
- The prominent role of the services sector in the economy will make it difficult to recoup lost activity.
- Governments need to step in to power future growth.
- Inflation risks may resurface upon the revival of consumer demand propped up by fiscal stimulus, if supply chain disruptions persist.
- We expect a staggered and protracted recovery after strict containment measures are lifted.
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