{"id":26460,"title":"The global economy in the grip of the corona crisis – how bad can it get?","link":"https:\/\/bst-europe.eu\/de\/globalization\/the-global-economy-in-the-grip-of-the-corona-crisis-how-bad-can-it-get\/","date":"23. M\u00e4rz 2020","date_unix":1584955991,"date_modified_unix":1687879680,"date_iso":"2020-03-23T09:33:11+00:00","content":"

At the beginning of the spread of the\u00a0COVID-19<\/strong>, in January, there was still hope that economic damage to the\u00a0world economy<\/strong>\u00a0would\u00a0remain manageable<\/a>. Now it is becoming clear that the economic slump could be even greater than that which occurred after the\u00a0Lehman bankruptcy<\/strong>\u00a0in 2008\/09.<\/p>\n

Understanding the current economic crisis<\/h2>\n

The current economic crisis is a combination of a demand crisis, a supply crisis, and a financial market crisis:<\/p>\n

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  1. The Demand Crisis<\/strong>: For fear of contagion, people are avoiding shops in city centers. They refrain from visiting restaurants and cinemas and cancel holidays, etc. Such demand crises are particularly severe when state authorities prohibit such activities for reasons of disease prevention.<\/li>\n
  2. The Supply Crisis:<\/strong>\u00a0An infectious disease leads to the loss of labor and thus reduces production capacities. Even healthy workers do not go to work for fear of infection. If the products manufactured are used as inputs, production is restricted at other companies if there are no substitutes for the missing inputs. The impact of this is particularly severe when global supply chains are broken.<\/li>\n
  3. The Financial Market Crisis:<\/strong>\u00a0Both developments, a demand, and a supply crisis mean a drop in sales for companies, while costs remain more or less unchanged – at least in the short term. The consequence is a loss of profits, which manifests itself in the form of price slumps on stock markets with a considerable decline in assets. The fear of possible losses accelerates the sale of shares and thus triggers a fall in prices.<\/li>\n<\/ol>\n

    All three elements of the crisis reinforce each other: if people earn\u00a0less money<\/strong>\u00a0because of production restrictions, they fail as\u00a0demanders<\/strong>\u00a0and exacerbate the demand crisis. Even in companies that could continue production, production and employment are cut back due to lack of demand.<\/p>\n

    The international interdependence of national economies means that the production slump in one country spreads very quickly around the world.<\/p>\n

    How big will the economic slump be?<\/h2>\n

    The expected effects of the coronavirus on\u00a0economic growth<\/strong>\u00a0cannot be seriously quantified because there are still far too many\u00a0uncertainties<\/strong>.<\/p>\n

    At the beginning of March this year, Warwick McKibbin and Roshen Fernando published simulations of various scenarios for global\u00a0COVID-19 spread<\/a>\u00a0. They work with three pandemic scenarios (low – middle – high):<\/p>\n