Global | The economic legacy of this annus horribilis

Beyond the human tragedy of COVID-19, 2020 has left us with a long list of economic consequences for the future. They are not all negative. The most obvious consequence is the severe recession, with global GDP expected to decrease by more than 2.5%, which is a bigger decrease than that of the 2009 financial crisis (-1.7%).

Key points

• Key points:
• We know that this decline is temporary and is not a response to cumulative imbalances of inflation or debt, as is the case with normal recessions. This should mean we are able to quickly return to how the situation was previously.
• But the second-round effects of the crisis are going to be profound, including rising unemployment rates, part of the corporate fabric being lost and significantly higher levels of public and private debt, which will all have an effect on the ability to grow in the medium term.
• Another new development of this crisis is the much more determined use of monetary and fiscal policies than in the past with a view to mitigating the effects of the pandemic, especially in Europe, which was previously more reserved than the United States.
• Indeed, the European program called Next Generation EU and its possible implications for the future of the euro are two positives that have come out of this crisis, as well as Northern European countries adopting a more open attitude toward countercyclical policies.
• The pandemic will also leave us with long-term consequences in terms of sectoral changes, disproportionately affecting social consumption sectors over other activities. It remains to be seen how COVID-19 will alter the demands for greater security in different sectors and the way in which we respond to new needs.

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