A Cautious Look at Economic Prospects Beyond the COVID-19 Disaster

COVID-19 has delivered a powerful double punch to the chin of the global economy, combining a terrifying pandemic with a collapse in production because of the withdrawal into their homes of half the world’s workers. The uncertainty generated by the medical and economic shock is paralyzing consumers and investors, and the dispersion of short-term economic forecasts is far wider than at any time in modern history, about six times greater than during the Great Financial Crisis. This brief reviews the recent evidence on the epidemic and on the economy and assesses the prospects in 2021 and beyond. Is the pessimism overdone?