Grim Short-Term Prospects for the World Economy

Key points

• The effects of the coronavirus pandemic and the control measures taken to combat its spread have transformed the immediate global economic outlook in an unprecedented manner from our previous forecast in February.
• These are highly uncertain times. And we expect widespread falls in GDP, particularly in the first half of this year, as the lockdowns have suspended many forms of economic activity. Our main scenario assumes that the measures to control movement and social contact will be eased gradually, permitting a wider range of economic activities to be undertaken as 2021 dawns.
• We project that global GDP will fall by 3½ per cent this year, a downward revision of around 6½ percentage points from our view in February. The fall in GDP is substantially larger than during the Financial Crisis (–0.1 per cent). The closest paralleli s the Great Depression, when there was multi-year fall in output.
• Once lockdowns are lifted, higher output could lead to marked year-on-year rises in GDP next year. We project an increase of some 7 per cent. But in many countries, even by 2022, GDP will still be lower than had the pandemic not occurred.