The spread of COVID-19 and the duration of severe containment measures that reduce economic activity will largely determine the pandemic’s final economic impact. To illustrate the dynamics of the pandemic and address the underlying uncertainty in several scenarios, we use an epidemiological model.
Our baseline now sees the world GDP falling 3.5% in 2020. However, our downside scenario, in which lockdowns become widespread and are extended into Q3 as countries fail to stem the outbreak, sees an 8% contraction in 2020.
Epidemiological models suggest that a premature relaxation of lockdowns could lead to more social distancing being imposed later due to an imminent collapse of health care systems in both emerging and advanced economies.