The global economy could shrink by 3.2 percent in 2020 due to Corona

The world economy could shrink this year, according to the UN. Due to the virus pandemic, the ECB is also expecting a massive economic slump in the euro area in the second quarter.

The coronavirus pandemic and the lockdowns and travel restrictions it was designed to contain have shaken the global economy.

Dhe United Nations is dampening its economic forecast due to the corona pandemic. The world economy could shrink by 3.2 percent this year, according to a statement on the UN semi-annual report on the economic situation. In the worst case, a decline of 4.9 percent is conceivable. A gradual recovery is not expected until 2021, the outlook said.

Before the crisis, the UN had assumed growth of 2.5 percent. At the beginning of April the assessment clouded over significantly, at that time the organization assumed a minus 0.9 percent.

The pandemic unleashed a health and economic crisis of unknown proportions, stressed the UN in New York. The number of new infections and deaths related to the Covid-19 disease has declined in recent weeks. However, there are still uncertainties about the future course of the pandemic and its economic and social consequences.

“Without rapid breakthroughs in vaccine and therapy development, the world will likely be significantly different after Covid-19,” said the United Nations. A slow recovery and a prolonged economic slump threatened – with increasing poverty and inequality.

Strong economic downturn

Due to the virus pandemic, the ECB is also expecting a massive economic slump in the euro area in the second quarter. In the first quarter of the year, when the economy was only affected by the virus spread and containment measures in the last few weeks of the quarter, gross domestic product (GDP) shrank by 3.8 percent quarter-on-quarter.

“The strong economic downturn in April suggests that the effects in the second quarter are likely to be even more serious,” says the latest economic report of the European Central Bank (ECB), which was published on Thursday. The duration of the pandemic is uncertain. It was therefore difficult to predict the length and extent of the recession and the subsequent recovery.

From the point of view of the ECB experts, the severity of the downturn and its length will crucially depend on how long the containment measures remain in place and whether they are successful. “The extent to which delivery capacities and domestic demand are permanently impaired will also be of central importance,” says the report. It is also crucial whether it will be possible to mitigate the negative effects on income and employment.

According to ECB Vice President Luis de Guindos, the currency area has now bottomed out in terms of economic activity. He expects a recovery in the third and fourth quarters. From his point of view, it will take around two years for the economy to recover completely and return to pre-crisis levels.