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What Does the Road to Recovery from COVID-19 Look Like? Expert Survey on Worldwide Effects of the Pandemic

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What Does the Road to Recovery from COVID-19 Look Like? Expert Survey on Worldwide Effects of the Pandemic 26 EconPol 2020 October POLICY REPORT Vol. 4 World Economy: What Does the Road to Recovery from COVID-19 Look Like? Expert Survey on Worldwide Effects of the Pandemic Dorine Boumans, Pauliina Sandqvist and Stefan Sauer (EconPol Europe, ifo Institute) headed by KOF Konjunkturforschungsstelle KOF Swiss Economic Institute EconPol POLICY REPORT A publication of EconPol Europe European Network of Economic and Fiscal Policy Research Publisher and distributor: ifo Institute Poschingerstr. 5, 81679 Munich, Germany Telephone +49 89 9224-0, Telefax +49 89 9224-1462, email [email protected] Editors: Mathias Dolls, Clemens Fuest Reproduction permitted only if source is stated and copy is sent to the ifo Institute. EconPol Europe: www.econpol.eu World Economy: What Does the Road to Recovery from COVID-19 Look Like? Expert Survey on World-Wide Effects of the Pandemic Dorine Boumans, Pauliina Sandqvist and Stefan Sauer1 The outbreak of COVID-19 has had a detrimental effect on global health care systems, with a ripple effect on every aspect of human life as we know it. On January 30, 2020 the World Health Organisation declared COVID-19 as a global emergency (WHO, 2020). In response, to “flatten the curve”, governments have enforced border shutdowns, travel restrictions, and general lockdowns with numerous social distancing measures such as closed schools, shops, services and, to a lesser extent, the manufacturing industry. This in turn led to an impending economic crisis and recession all around the globe. The IMF World Economic Outlook of June 2020 projects global growth at -4.9 percent in 2020 (IMF, 2020a). After more than six months of coronavirus being part of our life, most economies have opened up again, although with certain restrictions against the spread of the virus. As the economy and our daily life return to a “new-normal”, the possibility of a second wave leaves lots of uncertainty about future developments. To understand indications about the impact of the COVID-19 pandemic on economic performance in different countries across the world, we conducted a survey among 950 economic experts in 110 countries between August 12th and 29th, 2020.2 The survey builds A EconPol Europe, ifo Institute; Poschingerstr. 5, 81679 München, Germany. Email: [email protected], sand- [email protected], [email protected]. We would like to thank Jette Anderson and Mathijs Toonen for research assistance as well as Jasmin Nothhaft and Sigrid Zengel for technical support. 2 The survey was conducted among the panel of the ifo World Economic Survey. In selecting participants for the survey, emphasis is placed on their professional competence in economic matters and inside knowledge of their reporting countries. This is guaranteed by screening their education and current affilia- tion as well as place of residence. See (Boumans and Garnitz, 2019) for further details. More studies have used the supplementary question for further research cf. Boumans et al., 2018 and Boumans et al., 2020a. 1 on a previous survey conducted in April. Back then, economic experts forecasted GDP to be negative in 2020 almost everywhere around the world with only experts in emerging and developing Asia to have reported on average a positive GDP forecast (Boumans et al., 2020b). Most experts had expected the COVID-19 induced economic recovery to last at least until 2022. The second wave of the survey will take a closer look at how the recovery is expected to look in different countries, whether sufficient fiscal stimulus packages were introduced and which policy measures are most suitable to help the economy. Moreover, short- and long- term impacts of COVID-19 on companies were surveyed. Finally, experts were asked about the second wave preparedness of their country. This report gives an overview of the most important results of the survey and compares them in different world regions and countries. An extra focus is placed on the European Union’s strategy to combat the crisis and how experts from member states assess the different policy measures. How hard did the recession hit and what is recovery expected to look like? The swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction. Global output collapsed in the first half of 2020 and almost all countries fell into recession. Following the easing of confinement measures and the initial re-opening of businesses, economic activity started to pick up again, but the pace of the global recovery has lost some momentum over the summer months. Global GDP growth for 2020 is currently projected by the IMF at -4.9% (IMF, 2020a). For 2021, the IMF World Outlook forecasts global growth at 5.4 percent. Overall, this would leave 2021 GDP 6.5 percentage points lower than in the pre-COVID-19 projections of January 2020. We asked the economic experts to give the expectations of GDP growth in their country in 2020 and 2021 divided into their ‘most likely’ guess as well as best- and worst-case expectations. 2 The results confirm the considerable recession in most countries (Table 1). China is one of the few countries that is expected to still grow in 2020 (+2.3%) but by a lot less than forecasts had projected before the crisis. Weighting the country-specific forecasts by GDP, the most likely expectations of the surveyed experts would result in a decrease of global GDP by -4.4% this year. Hence, the annual growth rate is expected to be around 8 percentage points below the pre-crisis forecast of the IMF in January that expected world GDP to grow at a rate of +3.3% in 2020 (IMF, 2020b). In the Euro area experts have, on the aggregate level, the most negative growth expectations for GDP (-8.9%) with negative growth rates in every member state. In Spain (-13.6%), Italy (-10.5%), and Portugal (-10.5%) even a double-digit negative growth is expected to be likely. Another country with double-digit negative growth expectations is the United Kingdom (-10,0%) where the economy is also affected by the high uncertainties caused by Brexit. U.S. experts project GDP of their economy this year to decrease at 6.5%. The average best-case and worst-case expectations for the GDP in 2020 shown in Table 1 make the currently very high uncertainty clear even with two quarters already covered by official statistics. Especially with the rising risk of a second wave of the pandemic that could go along with another lockdown the worst-case GDP expectations in many countries are much more negative than the most likely expectations. The experts’ expectations for 2021 predict positive GDP growth for all countries catching up some of the decrease of 2020. Nevertheless, these expected positive growth rates are not as high as the expected negative rates for 2020. 3 Table 1: Expected Growth of GDP in 2020 and 2021 Most likely Best-case Worst-case Most likely GDP 2020 GDP 2020 GDP 2020 GDP 2021 World Economy -4.4% -2.2% -7.5% 3.2% European Union -8.4% -5.8% -11.8% 3.2% Euro area -8.9% -6.4% -12.1% 3.6% Germany -7.1% -4.7% -9.8% 2.9% France -8.7% -6.7% -12.7% 5.4% Italy -10.5% -8.0% -13.7% 3.7% Spain -13.6% -9.9% -18.0% 3.4% Netherlands -6.2% -4.2% -9.0% 3.0% Greece -8.9% -6.3% -11.7% 4.4% United Kingdom -10.0% -6.2% -14.7% 2.8% USA -6.5% -2.7% -12.1% 2.7% Other advanced economies -6.4% -4.1% -10.4% 1.7% Japan -6.8% -4.5% -11.5% 0.4% Canada -6.1% -3.5% -9.0% 2.9% Russia -5.5% -4.0% -7.6% 1.6% Emerging and developing Asia -0.4% 1.0% -2.2% 4.3% China 2.3% 3.0% 0.6% 6.3% India -5.3% -2.4% -7.5% 0.4% Latin America -7.9% -5.8% -10.5% 1.9% Brazil -6.1% -4.7% -8.0% 2.8% Sub-Saharan Africa -4.2% -0.8% -6.8% 2.2% South Africa -9.3% -5.8% -14.9% 1.7% Note: On the aggregated levels country results are weighted according to 2017 PPP-adjusted GDP as reported by the IMF. There is also a lot of uncertainty about how and when GDP will go back to pre-crisis levels. The experts’ expectations about the duration of the recovery period therefore differ considerably (Table 2). Looking at all respondents jointly, more than one third of the experts (36.4%) expect real GDP to be back to pre-crisis level in 2022. 19.4% of the experts expect full recovery in 2023, while 24.4% are more optimistic and expect GDP to catch up pre-crisis levels in 2021 (Q1-Q2 2021: 6.3%; Q3-Q4: 18.1%), and 15.7% even expect it to happen later than 2023. For all country groups in Table 2 except Africa, 2022 is the year most expect GDP to catch up to pre-crisis level. The same can also be seen on a country level. Within the 4 member countries of the European Union, only Italian experts are even more pessimistic, with 31% expecting full recovery for 2023 and 35% even later. Table 2: Expectation of real GDP catching up to pre-crisis levels 1st half of 2nd half later than in 2022 in 2023 2021 of 2021 2023 European Union 4.3% 16.1% 38.0% 22.1% 16.1% USA 6.3% 25.4% 38.1% 9.5% 14.3% Other advanced economies 8.7% 20.2% 36.5% 15.4% 15.4% CIS 7.4% 18.5% 46.3% 20.4% 5.6% Emerging and developing Asia 12.5% 20.8% 35.4% 12.5% 14.6% Latin America 8.2% 15.3% 35.3% 21.2% 17.6% Africa 7.9% 21.1% 21.1% 18.4% 22.4% Total 6.3% 18.1% 36.4% 19.3% 15.7% Note: Own calculations based on survey answers.
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