COVID-19 likely to shrink global GDP by almost one per cent in 2020


The global economy could shrink by almost one percent this year—0.9 percent—due to the COVID-19 pandemic, and world output could contract further if imposed restrictions on economic activities extend to the third quarter of the year and if fiscal responses fail to support income and consumer spending, according to a new briefing issued by the United Nations Department of Economic and Social Affairs.
Growing restrictions on the movement of people and lockdowns in Europe and North America are hitting the service sector hard, particularly industries that involve physical interactions such as retail trade, leisure and hospitality, recreation and transportation services. Collectively, they account for more than a quarter of all jobs in these economies. As businesses lose revenue, unemployment is likely to increase sharply, transforming a supply-side shock to a wider demand-side shock for the economy.
The severity of the economic impact—whether a moderate or deep recession—will largely depend on the duration of restrictions on the movement of people and economic activities in major economies and on the actual size and efficacy of fiscal responses to the crisis. According to the report, a well-designed fiscal stimulus package, prioritizing health spending to contain the spread of the virus and providing income support to households most affected by the pandemic would help to minimize the likelihood of a deep economic recession.
“Urgent and bold policy measures are needed, not only to contain the pandemic and save lives, but also to protect the most vulnerable in our societies from economic ruin and to sustain economic growth and financial stability,” stressed Liu Zhenmin, Under-Secretary-General for Economic and Social Affairs.