Coronavirus Pushes Leading Economies Towards Recession

Every month of coronavirus lockdown will slash 2% in annual GDP growth of the world’s major economies, according to a new study.

Many economies will collapse into recession which is unavoidable while governments concentrate on fighting the pandemic, says think-tank the Organisation for Economic Co-operation and Development (OECD).

Most economic sectors are expected to shrink by at least 30%, while travel and tourism will slump by around 70%, the report reveals.

“The high costs that public health measures are imposing today are necessary to avoid much more tragic consequences and even worse impacts on our economies tomorrow,” said OECD Secretary General Angel Gurria.

Saving lives is first priority

“Millions of deaths and collapsed health care systems will decimate us financially and as a society, so slowing this epidemic and saving human lives must be first priority for governments.”

“Our analysis further underpins the need for sharper action to absorb the shock, and a more co-ordinated response by governments to maintain a lifeline to people, and a private sector that will emerge in a very fragile state when the health crisis is past.”

Gurria was speaking after a virtual summit of OECD leaders.

To tackle the economic chaos of the coronavirus crisis, the G20 group of the world’s leading developed economies have already pledged a $5 trillion cash injection to reboot global GDP once the pandemic is beaten.

The OECD reports the impact on global GDP will depend on the duration of lockdowns, fall in demand for goods and services and how long financial rescue measures take to come on line.

Reduced global demand

“Many countries in which tourism is relatively important could potentially be affected more severely by shutdowns and limitations on travel,” says the OECD.

“At the other extreme, countries with relatively sizeable agricultural and mining sectors, including oil production, may experience smaller initial effects from containment measures, although output will be subsequently hit by reduced global commodity demand.

“There will also be some variation in the timing of the initial impact on output across economies, reflecting differences in the timing and degree of containment measures. In China, the peak adverse impact on output is already past, with some shutdown measures now being eased.”