Many economists agree that the pandemic will deliver a lasting blow to output and the global economy will be substantially smaller by the end of this decade than would otherwise have been the case. However, we suspect that some of this pessimism about the long term is not only overdone, it misses the point.
The economic legacy left by the virus may not reveal itself in measures such as GDP. Rather than fixating on the long-run trajectory of GDP, we analyzed for the wider legacy of the pandemic. In that regard, we are also publishing ‘Economies post- COVID’, a special reports examining how the global economy will evolve in the post-pandemic age.
For instance, ongoing behavior shifts that were already underway among consumers and businesses will be accelerated by the pandemic. Moreover, the role as well as the size of the State will be different and more important in the post-pandemic World. The questions of how governments would fund themselves will be more important.
Reaction towards globalization and multilateralism will intensify, marked by a more sustained rupturing of relations between China and much of the rest of the world.
The huge policy response to the pandemic will have long-lasting implications for government debt burdens and potentially inflation.