World, Latest on coronavirus outbreak

COVID-19: Biggest hit to global economy since WW II

Lockdowns to impose large fiscal cost, sharp increases in public debt, says European multilateral bank

Gokhan Ergocun   | 08.04.2020
COVID-19: Biggest hit to global economy since WW II

Istanbul

ISTANBUL 

The novel coronavirus pandemic is expected to cause "the greatest disruption to global economic activity since the Second World War," the European Bank for Reconstruction and Development (EBRD) said Wednesday.

It will affect the banks' emerging economies and a rapid recovery is not guaranteed, the bank said in a statement.

Normalcy is expected to return in the second half of 2020 in the bank’s positive scenario but if lockdowns remain in place much longer, effects on the economy will be deeper.

"This would have a negative impact on the potential rate of medium-term growth and may result in deep structural damage to consumer service industries, such as airlines, cinemas and restaurants, although others, including food deliveries, may benefit," it said.

It warned about public debt because of the virus. "The lockdowns would also impose a large fiscal cost and result in sharp increases in public debt. These new levels of debt may be affordable in some countries because of very low real interest rates but other economies may face binding fiscal constraints.”

After appearing in China last December, the novel coronavirus has spread to at least 184 countries and regions, according to data compiled by the U.S.-based Johns Hopkins University.

More than 1.45 million cases have been reported worldwide, with Europe being the worst-hit continent.

The global death toll stands above 83,600 and more than 308,700 patients have recovered.

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