Relevance beyond the crisis: Economic outlook scenarios

GIS Statement by Henrique Schneider*

  • A post-SARS scenario could see a quick economic bounce-back
  • A Spanish flu-type scenario would mean a prolonged recession
  • Current data suggest a U-shaped recovery

This report is part of a GIS series on the consequences of the COVID-19 coronavirus crisis. It looks beyond the short-term impact of the pandemic, instead examining the strategic geopolitical and economic effects that will inevitably be felt further in the future.

In January 2020, the International Monetary Fund was optimistic. It claimed that “global growth is projected to rise from an estimated 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent for 2021.” That outlook, of course, has changed dramatically since.

Only three months later, various organizations predict that the world economy will grow at a dismal 0 to 1.5 percent in 2020. Can these numbers be trusted? The estimates are only as good as their underlying premises, and therein lies the problem. For all that we know today, it is difficult to make assumptions for two reasons. First, in times of crisis, there is a bias to assume crisis in all models. Second, there are many unknowns to be modeled. The chief unknowns are:

(1) Epidemiological issues | How does COVID-19 spread? How do infection rates change over time? How will immunization and inoculation procedures be established? Does the epidemiological spread follow a steady or a changing pattern, if at all? What are the effects of the various countermeasures taken by governments? …

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*Henrique Schneider is a professor of economics at the Nordkademie University of Applied Sciences in Elmshorn, Germany and chief economist of the Swiss Federation of Small and Medium Sized Enterprises in Bern, Switzerland.