The outbreak of coronavirus (COVID-19) is one of the greatest global health emergency in modern human history. With over half a million people infected by the disease, and tens of thousands dead, the virus continues to infiltrate cities and communities.

As entire countries are forced into stringent lockdowns, the virus is taking a severe toll on economies, with businesses being shut down and people’s movement severely curtailed. While the crisis continues to deepen, we take a closer look at the nature of the global recession triggered by coronavirus.

The recession is here

Although there are predictions of a prolonged or deep recession in the coming months, many countries around the world are already beginning to feel the impact of the economic fallout. Industries such as air travel, hospitality, retail, and auto manufacturing are among those hit hardest by coronavirus.

Stock markets have sustained huge losses while oil prices have plummeted in recent weeks. Unemployment is fast rising, and in USA alone, over 40 million people have become unemployed in recent months. Governments’ spending is being diverted from various sectors of the economy to cater to the health emergency. A debt crisis is beginning to emerge for many developing nations.

A deserted street in Venice, Italy, due to coronavirus (COVID-19)
A near-deserted street in Venice, Italy – one of the earliest affected countries by coronavirus (Photo: Reuters)

Recession could prove worse than 2008 crisis

International Monetary Fund (IMF) chief  Kristalina Georgieva has warned that the recession triggered by the coronavirus could actually be worse than the one caused by the 2008 financial crisis. She has urged countries to respond with “very massive” spending to avoid large-scale bankruptcies and debt defaults. More than 80 countries have already requested IMF help to counter their growing economic woes.

Negative growth projected for 2020

The US-based credit rating agency, Moody’s, has projected the world economy to shrink by 0.5 percent in 2020. However, the actual result could even be worse. A negative growth will effectively wipe off well over $1 trillion from the value of the world economy.

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Previously, Moody’s had predicted the 2020 growth at 2.6 percent, but growth projections for the coming periods are constantly being revised down as the virus takes its real toll. During the last 50 years, global economic growth has only once been recorded as negative, which was -1.68 percent during 2009.

No easy cure

There is no easy way to counter this recession for two reasons. First, the lockdowns imposed by many countries leave little room for efforts to revive the economy yet. Second, the recession is global in nature, affecting nearly all countries of the world, and causing businesses across the globe to be adversely impacted.

Also Read: Has the World Become More Prosperous in the Past Decade?

“There is no global treasury to stimulate demand, pump cash into circulation, subsidize employment and maintain investment,” writes Simon Jenkins, a Guardian columnist. The fact that social distancing is the only known strategy to curtail the spread of the pandemic certainly does not help the cause of the economy.

Recovery by 2021?

IMF believes a global recovery is expected in 2021 subject to the containment of the virus and strengthening of health systems around the world. Despite a possible recovery, however, countries are expected to continue suffering the effects of the economic fallout for years to come, according to Angel Gurria, the secretary general of Organization for Economic Co-operation and Development (OECD).

“The most urgent priority is to minimize the loss of life and health. But the pandemic has also set in motion a major economic crisis that will burden our societies for years to come…Only with immediate, large-scale and coordinated actions will the economy be ready for a quick and vigorous restart.” – Angel Gurría, OECD Secretary-General

In the coming weeks and months, three important metrics shall determine the actual extent and impact of the recession: GDP, unemployment, and stock markets. The key to economic recovery lies in the containment of coronavirus: the sooner it is controlled globally, the faster the recovery is likely to be.