Most economists agree that the pandemic will deliver a lasting blow to output and the global economy will be substantially smaller by the end of this decade than would otherwise have been the case.
However, we suspect that some of this pessimism about the long term is not only overdone, it misses the point.
The economic legacy left by the virus may not reveal itself in measures such as GDP. Rather than fixating on the long-run trajectory of GDP, we should look for the wider legacy of the pandemic. To that end, we are publishing ‘Economies After COVID’, a special series of reports examining how the global economy will — and won’t — change in the post-pandemic age.
For example, changes in behaviour that were already underway among consumers and businesses are likely to be accelerated by the pandemic. We also don’t think the size and role of the state will return to their pre-virus condition, raising lasting and challenging questions about how governments fund themselves. The pushback against globalisation and multilateralism will intensify, marked by a more sustained rupturing of relations between China and much of the rest of the world.
The huge policy response to the pandemic will have long-lasting implications for government debt burdens and potentially inflation.
|Gross General Government Debt (As % of GDP)|
|Sources: Refinitiv, IMF, Capital Economics|
Upcoming reports will also look at household and corporate balance sheets, as well as how financial markets are likely to respond.
All of the reports in the series will appear on this dedicated page as they are published.
Senior economists have also presented a special series of webinars to discuss the themes raised in these reports:
A discussion about how the pandemic will – and won’t – permanently change global flows of trade, capital, people and ideas, with particular focus on the breach in US-China relations.
What will normal look like?
Examining whether consumers will return to pre-pandemic patterns of behaviour and why many countries will eventually regain their pre-virus paths – but why some won’t.
Private sector balance sheets
Will households and businesses – and ultimately their creditors – be able to pick up the COVID-19 bill as governments gradually withdraw their support?
Commodities After COVID
Economists from our commodities service discuss how the sector will be changed by the pandemic, including the impact of a structural Chinese economic slowdown and the approach of peak oil demand.
The financial markets impact
How will key financial asset classes perform after the pandemic? Our markets team’s discussion takes in the outlook for bonds, particularly if inflation makes a comeback, and why equities could continue to do relatively well.
Will inflation make a comeback?
Assessing whether the policy response to COVID-19 will have an inflationary sting, and if governments will tolerate higher inflation to address the debt mountains created through their response to the pandemic.
The role of the state in the post-pandemic world
Is the pandemic ushering in a new age of big government? Group Chief Economist Neil Shearing is joined by Chief North America Economist Paul Ashworth to discuss whether the interventionist state is here to stay.