Question

describe how you feel economic growth will be impacted by COVID-19 through 2021. Since we don’t know the future, please also consider what development or developments may change your forecast of economic growth?

Answer 1

This pandemic will affect the economic growth severely. World wide lockdown has stopped industrial production and trade to a great extent. There is a negative demand shock due to job loss as a result of shutdown of factories. Daily wage earners who's marginal propensity to consume is too high are not demanding goods and services because of no payment. Even if government of different countries are providing direct benefit transfer to the wage earners, its not enough to boost the effective demand in the market. As a result the whole world is approaching towards a great recession or may be depression. Most of the economies will face a growth rate between 1-3 or may be less than that. There are also countries those are severely affected might also show negative growth rate during subsequent years. But relief packages of different economy and policy changes made by government of different nation might change this forcast to some extent but the amount of damage this pandemic has already made will mot be recovered real soon. It will definitely take time to get back to the old growth rates for the nations.

If government will focus on more job creation, and income generation through different measure then the economy will recover faster.