The long-term growth impact of the pandemic

The economic effects of the Covid-19 pandemic are devastating worldwide. The IMF is projecting that the world economy will contract by 3% in 2020, before rebounding by 5.8% in 2021. The V-shaped recovery is predicated on the pandemic receding in the second half of 2020. A U-shaped scenario, with a prolonged recession, is also possible if the pandemic lingers, or if the recession triggers banking and/or sovereign debt crises. Will GDP growth get back to its pre-crisis trend in the aftermath the pandemic? Is an L-shaped scenario likely, with a permanent decline in the growth rate? Uncertainty surrounding the...

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