The crisis report: three months that changed the world

The bad quarter is over. Is the worst behind us?

The world: traumatic uncertainty

The economic shock of the Coronavirus crisis is much deeper and faster than the one caused by the global financial crisis – and perhaps even than that of the Great Depression. In the last two cases, stock markets fell by 50% or more, credit markets froze, massive bankruptcies followed, unemployment rates jumped above 10% and economies shrank by 10% or more year-on-year. But all these developments lasted two or more years; now, similar ones have taken place in less than six weeks.

During March, global stock markets crashed into a bear market within16 days: the fastest fall in history. Worldwide index MSCI AC World has lost 23% from the end of January, when the closure was announced in the Hubei region of China (plague source), until the end of March. Credit markets froze, although the central banks’ aggressive actions led to a significant improvement, except for high-yield bond markets, which do not benefit from monetary aid programs. Even during the Great Depression or World War II, world economic activity did not stop, as it did in China and is now happening in Europe, the United States and in other countries, which account for about two-thirds of the world’s population.

Finance giants such as Goldman Sachs, JP Morgan and Morgan Stanley expect US GDP to shrink by 6% in the first quarter and by 24%-30% in the second quarter. The US Treasury has warned that unemployment could rise above 20%, twice the peak of the global financial crisis. While most forecasts now speak of “V-shaped recovery”, which means a sharp decline in economic and financial activity, followed an equally sharp recovery in the second half of 2020, but all warn that no level of certainty cannot be reached in the forecasts until the peak of the global epidemic is behind us. Meanwhile, developments in the global economy look like “I”: a vertical line representing the plunge in the real economy. In fact, the world is faced with two epidemics: the Coronavirus epidemic and the Economic Stop epidemic.
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