The world economy on a tightrope

The world economy on a tightropeThe world economy on a tightrope.

Both scenarios are possible: A second wave of infections hits before year-end.

The COVID-19 pandemic is a global health crisis without precedent in living memory. It has triggered the most severe economic recession in nearly a century and is causing enormous damage to people’s health, jobs and well-being.The lockdown measures brought in by most governments have succeeded in slowing the spread of the virus and in reducing the death toll but they have also frozen, and sometimes destroyed, business activity in many sectors, widened inequality, disrupted education and undermined confidence in the future. The low-paid, low-skilled and the young have been particularly badly hit – by their exposure to the virus and by job losses.As restrictions begin to be eased, the path to economic recovery remains highly uncertain and vulnerable to a second wave of infections. With no near term prospect of a vaccine becoming available, two scenarios are equally likely. With or without a second outbreak, the consequences will be severe and long-lasting.

Scenario 1: A second wave of infections hits before year-end.

A renewed outbreak of infections triggers a return to lock-downs.

World economic output plummets 7.7% this year, before climbing back 2.7% in 2021.

The unemployment rate nearly doubles worldwide to 10.2 % with little recovery in jobs next year.

Scenario 2: A second wave is avoided.

Global economic activity falls 6% in 2020 and unemployment climbs to 9.4 % from 5.4 % last year.

Living standards fall less sharply than with a second wave but people’s income still drops on average to its lowest level in five years by 2021.

Two core scenarios.

Unemployment will soar. Labour market conditions are projected to deteriorate.

Many countries have introduced support measures to protect jobs in the near-term in hard-hit sectors, but young workers in particular are vulnerable.

Implement national and local policies most likely to ward off a second wave – even as restrictions ease,

Effective testing, tracking and tracing programmes are crucial Government policy in the months ahead will matter to the health outcome, but each of us has a role to play. The actions of each business and each citizen will shape this future. International cooperation is essential to the flow of medical supplies, food, and other essential supports to health. And countries must cooperate to find and share a vaccine. Know we’re in for the long haul either way. Continue emergency support to the most vulnerable people and businesses now. Invest in people, health, and the environment for the future. Governments must keep agile for both scenarios. Scale up plans to help specific sectors, both firms and their people, to recover from damage greater than first expected. Helping people and firms move into new activities will be an unprecedented challenge. Some sectors such as tourism and travel will have particular difficulty recovering and will need targeted support.