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Coronavirus And Global Recession

Jeffrey Frankel profile picture
Jeffrey Frankel


  • Recessions are exceedingly difficult to forecast and the wise economist avoids trying.
  • This coronavirus has now become a more serious case than 2003 or other precedents.
  • Even if a recession does not materialize in the near term, Trump's trade policy may signal a long-term break in post-war history.

Originally published February 27, 2020

At the start of the year, the economic mood was tending toward the optimistic. True, growth had slowed a bit in 2019. US GDP grew 2.3% in 2019, down from 2.9% in 2018. World growth was weak in 2019 as well: 2.9% according to IMF estimates, down from 3.6% the year before. Still, there had been no recession. And forecasts as recently as January called for world growth to rebound in 2020.

Global recession?

Now, just since January, there is new reason for pessimism. Recessions are exceedingly difficult to forecast and the wise economist avoids trying. But the odds of a global recession have risen dramatically. The reason is the coronavirus that originated in Wuhan, technically named COVID-19.

Early appraisals of the economic impact of the virus were reassuring. The historical record from other similar epidemics, such as the 2003 SARS virus, is relatively sanguine: an individual country may take a hit to GDP in a given quarter (an estimated minus 2% for China in the 2nd quarter of that year), but the macroeconomic impact is limited in time and space. Typically, the country's economy bounces back quickly in the subsequent quarters, as consumers release pent-up demand and firms rush to fill back orders and re-stock inventories. The result is that it can be hard to discern an impact in the country's GDP for the year as a whole. The same pattern usually holds for the effects of a much broader class of natural disasters such as hurricanes.

This coronavirus, however, has now become a more serious case than 2003 or other precedents. It could well push the world into recession. One criterion for global recession sometimes used by the IMF is world growth below 2½ %. (Unlike growth in advanced countries, global growth very rarely falls below zero - with the exception of

This article was written by

Jeffrey Frankel profile picture
Jeffrey Frankel is Harpel Professor of Capital Formation and Growth at Harvard University’s Kennedy School of Government. He is a Research Associate of he National Bureau of Economic Research, where he is also a member of the Business Cycle Dating Committee, which officially declares recessions. Appointed to the Council of Economic Advisers by President Clinton in 1996 and subsequently confirmed by the Senate, he served until 1999. His responsibilities as Member included international economics, macroeconomics, and the environment. Before moving East, he had been professor of economics at the University of California, Berkeley, having joined the faculty in 1979. Other past appointments include the Federal Reserve Board, Institute for International Economics, International Monetary Fund, and Yale. His research interests include international finance, currencies, monetary and fiscal policy, commodity prices, regional blocs, and global environmental issues. He graduated from Swarthmore College and received his PhD from MIT. Visit Jeffrey Frankel's Weblog (http://www.jeffrey-frankel.com/)

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Comments (2)

More jobs coming home....and thats the main reason the swamp has been trying to get rid of Donald Trump from day one....elites getting rich by making their products in china and putting us workers on welfare....not rocket science.
Sanjay John profile picture
GDP is an approximation, it is a hodge podge of interpolations and making up data to come up with a bizarre net production of a country. It is non financial, and worrying about a 2 percent fall or growth in it is ridiculous.
Financial metrics like company revenues, etc are the only ones one must use to judge how a country is doing. Not a random creation of economists, who cant even define what they are measuring.

The definition of calculation of GDP is a giant word soup. I read up the SNA etc manuals, it is like astrologers' manuals.
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