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Longer-Term Impact of COVID19 on Growth

This is a syndicated repost published with the permission of True Economics. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

IMF published updated forecasts this week, and here the summary:
World Economic Outlook, June 2020, Growth Projections table
Click to enlarge
IMF has stopped doing 5 year forecasts this April, due to uncertainty induced by the COVID19 pandemic.
Looking at the longer run effects of the pandemic, based on October 2019 (pre-Covid19 trends), and earlier growth trend before the Global Financial Crisis (GFC) puts COVID19 pandemic into historical perspective:

Click to enlarge
The differences between the above trend lines are telling.
Globally, GFC resulted in a permanent loss of real income that amounts to a cumulative decline of ca 17 percent over 17 years (2008-2024). COVID19 is forecast to result in additional permanent loss of 3.2 percent within 5 years 2020-2024.
Eurozone has been hit even harder. GFC resulted in a permanent loss of real income to the tune of 12.8 percent while COVID19 is currently set to yield a permanent additional loss of income to the tune of 7.1 percent over less than 1/3rd of the post-GFC trend line duration.
The numbers above are rather ‘indicative’, in so far as any and all forecasts past 2020 are perilous at the very best. But you get the picture: we are witnessing two consecutive events that result in permanent deviation of economic activity away from the prior trends. And both events are sharp. Even with a ‘V-shaped’ recovery, we are in trouble (because a V-shaped recovery taking us into mid-2020 means recovering end-of-2019 levels of economic activity, while losing 1.5-2 years of growth momentum (recall, economy was slowing down in H2 2019 on its own, without COVID19).
As we say… [ok, well, may we do not say it often, but…] this picture is f*ugly…

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