Angus Economics: Economies Are In Sharp DeclineNeil Hardie
Both developed and emerging economies are in sharp decline together for the first time in many decades, and the global economy is heading into a recession. Policymakers in nearly every country have had to act extremely quickly to combat coronavirus and more than a quarter of the world’s population are now living under some form of social restrictions. These health protection measures are causing severe damage to the economy, but the alternative of taking no action would also have ended in recession due to millions of employees becoming infected by the virus and the extreme death toll hitting both confidence and activity severely.
All over the world, central banks are bolstering their financial systems by cutting interest rates, offering to purchases assets and making available large scale loans at minimum cost. Fiscal policy is also key to limiting the damage to economies and ensuring that activity is ready to restart as soon as the health crisis subsides. So policy makers are doing whatever they can to save jobs, and to help families who are already suffering significant levels of hardship. Here in the UK the Chancellor has introduced measures worth much more than the level of support given during the financial market crisis, whilst the US government has delivered a stimulus package worth a record breaking $2.2trn.
Meanwhile, consumer confidence in the US has registered its largest monthly decline since the height of the financial market crisis. And global labour markets have weakened with jobless claims in Canada, benefit claims in the UK and new jobless claims in the US all surging over the last week.
There is no doubt that the near term outlook for the economy is grim and early forecasts indicate very steep declines over the next few months. But we should now watch China closely as its government is planning to remove the lockdown in Wuhan on 8th April. If China’s policy makers can do this successfully, without any sign of the virus re-emerging, policymakers around the world will take heart that they have adopted a potentially successful strategy.
This report was produced for Dundee & Angus Chamber of Commerce by Dr Shona Dobbie, Angus Economics.