The economic consequences of the Corona crisis eclipsed all other economic slumps since the end of the Second World War. The recovery will be slower and later than initially hoped.
Leading indicators for economic development have fallen noticeably worldwide. The World Bank, the International Monetary Fund, the European Commission, national governments and economic researchers are all unanimously assuming a global recession for 2020. The International Monetary Fund (IMF) estimates that it will be stronger than the recession caused by the 2008/2009 banking crisis and could reach the extent of the depression of the 1930s. In detail:
A severe recession is also looming in the USA: By mid-May more than 36 million people had registered as unemployed as a result of the corona crisis. The Federal Reserve Bank expects this figure to rise to 47 million in the coming weeks. This means that the unemployment rate would rise to more than 30 percent. The IMF is expecting a 5.9 percent decline in gross domestic product, and the National Bureau of Economic Research even expects a slump of more than 10 percent in the fourth quarter compared to the same quarter of the previous year.
This is one of the reasons why the US government is trying to lift the restrictions as quickly as possible. US President Trump has now presented a three-stage plan to this end. However, he is meeting with resistance from numerous state governors.
In Germany, the restrictions will be lifted step by step: Retailers are now allowed to reopen most of their stores, schools are beginning to reopen. Restaurants, on the other hand, remain closed, and events are prohibited until the end of August.
In order to mitigate the economic consequences and increase the scope for action, the EU Commission had already recently lifted the stability pact. It now also accepts that national governments provide extensive guarantees for business loans. For loans of up to 500,000 euros, the guarantees may amount to 100 percent.
In mid-May, the bad data also seem to cloud the mood on the financial markets: After investors and stock exchange traders had ignored the situation in the real economy for weeks, prices are now falling. However, a crash comparable to the banking and bond crisis of 2008 has not occurred.
After an unprecedented crash, the oil price now appears to be stabilizing at a low level: It is about 40 percent lower than at the beginning of the year. According to estimates by energy agencies, demand for oil is likely to fall by up to 15 percent in 2020 as a whole. The oil-producing countries have therefore recently agreed to reduce daily production by around 10 percent.
According to the latest figures, gross domestic product slumped by 6.8 percent in the first quarter. In the same quarter of the previous year, the economy had still grown by 6.1 percent. According to official figures, production in mid-April has now returned to more than 90 percent of pre-crisis levels. However, economic researchers and chambers of commerce are reporting lower values. Whether there will be a further increase in the coming weeks depends less on the (unclear) health situation in China than on the development of demand from Europe and North America.
The important industrial locations and trading partners Taiwan and South Korea are affected to different degrees, but both have the corona crisis under control. They are benefiting from early, consistent measures to avert danger. The figures for other large countries in Asia are often unreliable. Indonesia, for example, reports only 16,000 infections, India only 78,000 infections in total. Nevertheless, the country is completely sealed off. In Tajikistan, Turkmenistan and North Korea the governments have decreed that their countries are not affected by Corona.
Europe is one of two global hotspots of the pandemic. Italy, Spain, France and Great Britain are particularly affected, while in Russia the number of cases has been skyrocketing in recent days. Almost all countries have imposed comprehensive curfews.
Latest update: 15th May, 2020