Coronavirus Watch: Lockdowns take a toll

The exponential growth of global coronavirus cases has triggered massive policy responses around the world. But in the near term the biggest uncertainty stems from the impact of lockdowns on economic activity.

While China’s output is picking up as restrictions subside, supporting our view of a bounce back in activity in Q2, most countries around the world are closing their shutters to some degree.

We think that predictions that people will be forced to stay at home for months are too pessimistic. But even a short lockdown of a month or so could have a huge impact on the global economy. For instance, INSEE estimate that the French economy is operating at about two-thirds capacity due to its lockdown.

Because of the increased use of more stringent shutdown measures the risks to our baseline global growth forecasts lie firmly to the downside. Hence, our alternative scenario, which assumes a contraction in global GDP growth of over 1% in 2020, is now looking like a more plausible outcome.

Topics: Global