UNCHARTED TERRITORY: COVID-19 AND THE SPECTRE OF RECESSION
A ‘grey rhino not a black swan’ is how one commentator characterised coronavirus (COVID-19) during the early days of the pandemic – a satisfactory metaphor at the time, but perhaps irrelevant now in light of the subsequent loss of life and portent of ruin for the global economy.
Predictable or not, COVID-19, apart from its tragic human consequences, is having a colossal impact on the global economy. Across the world, corporate failures abound, economic growth is flatlining and unemployment is escalating. For many, the stench of recession is in the air.
Projections by the United Nations Conference on Trade and Development (UNCTAD) show that the slowdown in the global economy is likely to cost at least $1 trillion in 2020. One “doomsday” scenario scoped by UNCTAD, in which the world economy grew by only 0.5 percent, would mean a $2 trillion hit to gross domestic product.
Further forecasts paint a similarly bleak picture. The Organisation for Economic Co-operation and Development (OECD) forecasts that business closures could result in reductions of 15 percent or more in the level of output throughout advanced economies and major emerging market economies, while in the median economy, output would decline by 25 percent. In its analysis, the World Economic Forum (WEF) observes that markets have suffered losses unseen since the 2008 financial crisis, with few sectors having been spared by a crisis threatening a lengthy global recession.
“COVID-19 disruption is massive and is wreaking havoc on the global economy,” concurs Dr Nada R. Sanders, distinguished professor of supply chain management at D’Amore-McKim School of Business, Northeastern University. “This is seen across all industry sectors, from high-tech supply chains to consumer goods to pharmaceuticals. Most troubling is the supply chain disruptions of seemingly simple products, from masks and personal protective equipment (PPE) to toilet paper.”
Jul-Sep 2020 Issue
Fraser Tennant