A two-month quarantine can mean a recession of -3.6% in the Eurozone’s annual GDP

The Corner

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The global economy is on track to contract significantly this quarter, enough to end the ten-plus years of expansion following the GFC. By looking at the decomposition of the US and Eurozone GDP and using a consumption-cut quarantine scenario, we can estimate the impact of the current social distancing measures on these two major economies. In quarterly terms, a quarantine that would last for two months (as in China), with 90% of the population complying and cutting consumption by 70%, would result in a -5% (qoq) growth shock. This would bring 2020 US growth to -2.9% and Eurozone growth to -3.6% (yoy), accounting for growth normalisation in the second half of the year. According to the scenario, 2020 could see the first global recession since the Great Financial Crisis.



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#Global_Recession #Financial_Crisis #GDP #Economic_Growth

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