Research
Tue, 28/04/2020 - 12:00
· 1 min read

COVID-19: The World After the Pandemic

Most European countries are past, or at the peak of COVID-19 infection and their governments are now looking towards strategies to reactivate their economies.

Whilst lockdown measures will be eased, social distancing may still apply, leaving businesses vulnerable. This is likely to mean that governments will maintain very ambitious measures to support their economies.

  • Governments have large stimulus packages already in place to support the private sector through the paying of wages and supported employment schemes. More could be announced.
  • Policy responses should be effective in supporting the economy. Nonetheless, global GDP may contract by 2.5% in 2020 before recovering sharply in 2021 to 5.6%.
  • Expected disinflation in the short term. In the longer term, the range of potential inflation outcomes has widened as a result of COVID-19.
  • Coherent international cooperation has been largely absent since the beginning of the crisis. European Union (EU) members have struggled to create a common approach.
  • The EU will support members through the European Stability Mechanism (ESM) and will tolerate breaches of the Maastricht criteria on debt. Over the longer term this will test European solidarity and calls for reform may go unheeded.

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COVID-19: The World After the Pandemic