Along with massive consequences for public health, the global pandemic has taken a toll on the world economy. Due to mandatory lockdowns, economic activity has been all but crippled, barring the operations of most of non-essential businesses. As a result, except China, many world economies have contracted in 2020.
The global economic downturn has also raised concerns that the world is living through another economic recession such as that experienced in 2009. But to what extent do these recessions resemble each other and how do they differ?
The economic impact of the “Great Lockdown” of 2020 is actually greater than that of the “Great Recession”. In 2009, the global economy contracted by 0.1%, but in 2020 it is estimated to have shrunk by 3.5%.
According to an estimate in early 2020 , the cumulative loss of global GDP during 2020 and 2021 could amount to $9 trillion, an amount greater than Japan and Germany’s combined economies. Another estimate posits that the economic impact of COVID-19 could be $4.3 trillion in the US alone, or the equivalent of a 20.3% decline in its overall economy.
Furthermore, in 2009, it was a defect in the global financial system that led to the recession: namely, the collapse of high-risk mortgage lending in the US financial market. Thus, recovery took a relatively long time, especially in the eurozone.
On the other hand, the economic contraction of 2020 mostly occurred due to mandatory lockdowns, and not necessarily because of disfunctions in the global economy. For this reason, when mandatory lockdowns are lifted, more people get vaccinated, and herd immunity is established, a relatively swift recovery should be expected.
That said, there is still guarded optimism when it comes to estimates as to how quickly a recovery could be, even if lockdowns are lifted. A relatively slower recovery is expected for certain industries. According to Boston Consulting Group, for instance, even though 2021 might be better for the travel industry, it is not expected to reach 2019 levels until at least 2023 or 2024.