Brookings Institution Webinar on the COVID-19 Recession

Brookings Institution

“How deep will the COVID-19 recession be?”

Monday, July 6, 2020

Panelists

• M. Ayhan Kose, Nonresident Senior Fellow, Global Economy and Development
• Joyce Chang, Chair of Global Research, J.P. Morgan
• Eswar Prasad, Senior Fellow, Global Economy and Development
• Brahima Sangafowa Coulibaly, Vice President and Director, Global Economy and Development; Senior Fellow, Global Economy and Development

Overview

In a webinar led by David Wessel, Director of the Brookings Institution Hutchins Center on Fiscal and Monetary Policy, panelists discussed and examined the impact of the COVID-19 pandemic on the global economy. In the opening remarks, Wessel noted the pandemic’s potential to cause the deepest global recession since World War II and the broadest collapse in per capita incomes since 1870. He said the pandemic may heighten inequality, especially as the pandemic’s epicenter rotates to the global south where there is limited ability to combat the virus. He called for global coordination and cooperation to eradicate the virus because “the global system is only as strong as its weakest link.”

In a presentation by Ayhan Kose, Nonresident Senior Fellow, Global Economy and Development, he focused on the short-term and long-term implications of COVID-19 and policy priorities. He noted this is the first recession on record for emerging market and developing economies, where the pandemic is in full force and there is limited hospital and testing capacity. He explained that in the long-term, the pandemic will lead to weaker output potential, investment and productivity. He continued that policymakers must address the immediate health crisis, as well as look forward and lay the foundation for strong and sustained growth by pursuing reforms to reignite growth, enhancing debt and investment transparency, and coordinate policies globally. Kose noted that recovery will be painful, and policymakers must provide immediate, comprehensive, and bold responses to turn the global economy around.

The panelists examined how this crisis has impacted economies around the world, especially emerging markets. Joyce Chang discussed the disconnect between Main Street and Wall Street, as well as the difference in central bank reactions between the 2008-09 crash and the current economic crisis. Eswar Prasad stated the International Monetary Fund and the World Bank have used their resources to the greatest extent possible, although there still remains work to be done. He said his biggest concern about future recovery lies within the supply side of the economy and productivity levels. Brahima Coulibaly examined the impact of this crisis on Africa’s economy, explaining that less than one percent of GDP has been used in Africa’s fiscal response compared to other nations utilizing five to 20 percent of their GDP. However, he noted that efforts by other entities, such as the IMF, have been helpful. Ayhan Kose stated that problems that existed prior to the pandemic, such as poverty levels, will be exacerbated by the current state of the global economy.

In conclusion, each speaker offered his or her insight as to what will determine whether there will be a more robust recovery in the beginning of 2021. Prasad said he believes this determining factor will be the fate of small and medium-sized companies. Coulibaly said it will revolve around the existence of a vaccine or treatment. Chang stated it will be the ability to create jobs, and Kose said it depends on confidence in the markets.

For more information on this event, please click here.