In what could only be understood as a massive failure in the face of the global economy, COVID-19 has shook the world right to its core.
The global recession induced by the coronavirus outbreak due to the shutdown of businesses, states, and cities, is unfathomable. Experts even suggest that the US might be in for a very grave time with its economy worse than the time after the Great Depression.
- The US is facing the worst recession since 2008-09.
- Economic Depression is the more severe version of the economic recession.
- Global recession is likely to change the course of life after the containment of the virus.
Before we go any further, let us understand what exactly is recession and how it is any different from the much-feared economic depression. While some fear that the US is at a verge of depression, others feel that the economic disruption is akin to “bad recession”.
Recession is the loss in the GDP for two consecutive quarters. On the other hand, Depression is a prolonged version of recession defined by a decline in jobs and prices leading to deflation. It is more severe and generally leads to more than 10% of decline in the GDP of a country over a year.
Watch: What Makes This Collapse Different?
Is America Heading Towards Depression?
In the last few weeks, a whopping 17 million Americans have filed for the US employment benefits. While the employment rate grew up to 4.4% in March, Federal Reserve Bank of St. Louis, in one of its models, suggests this rate could go as high as 32%. The loss of jobs, according to the experts, may rise to 47 million through the course of the pandemic. What happens to the economy is dependent majorly on how small businesses will hang on all this while and further bounce back.
There could be deaths even due to increasing loss of jobs. US president Donald Trump insisted on the lethality of the recession and expressed how it could be the reason behind even more deaths than the ones caused by the pandemic.
You have suicides over things like this when you have terrible economies,” Trump said during a news conference on March 24. “You have death. Probably — and I mean definitely — would be in far greater numbers than the numbers that we’re talking about with regard to the virus.”
Trump Denies A Major Recession
As the president is trying with everything in his power to open the economy even before the pandemic is over, it is still a far fetched dream, for the people will still not entertain open businesses due to the fear of catching the virus. The aftermath of the pandemic is unknown. However, lives will change. It will not be the same. Will you survive.
“There will likely be some permanent damage inflicted on the economy,” says Greg Daco, chief US economist at Oxford Economics.
What this shock is doing is exacerbating pre existing inequality issues across the country. The individuals who have been hit the hardest are the individuals who were in the most precarious position to start with.
Is The Recession Going To Happen Globally?
While in the past, recessions happened due to financial reasons, it is due to a massive global pandemic that we are facing the possibility of recession all throughout the world now.
As per the estimations in a report by Economics Times, the global economy is likely to contract by 1% in the year 2020. And even worse would be the contraction in the second quarter.
What Is The Ground Reality?
World Bank Group President David Malpass said that the pandemic will cause “major global recession” that would hit the poorest and vulnerable countries the hardest.
We intend to respond forcefully and massively with support programs, especially for poor countries.Malpass said in one of his LinkedIn posts.
The currencies are plummeting in developing countries. Even if the virus is contained, the fear among people will likely make them hesitant to entertain open businesses. Furthermore, the anxiety and aversion towards spending among people will prevent the global economy from expanding.
Since the job loss has been massive, industries are weakened and there has been widespread bankruptcy. Lack of innovation and investment will lead to further loss.Deepak Kaistha
Worldwide, foreign direct investment is on track to decline by 40 percent this year, according to the United Nations Conference on Trade and Development.
“It will likely take two to three years for most economies to return to their pre-pandemic levels of output,” IHS Markit said in a recent research note.
No one knows what will be the end result of the pandemic. However, if there’s one thing that’s confirmed, it is that the global recession will take some time to fade. The emergence would be slower and lives will alter in a more permanent manner.