Global markets are volatile. Supply-chain disruptions are piling up. Economists are slashing forecasts. Investors are fleeing to the safety of bonds. The coronavirus epidemic is a public-health crisis, and it is morphing into an economic crisis, too.
The Organization for Economic Cooperation and Development forecast this month that in a best-case scenario, COVID-19, the disease caused by the coronavirus, and its fallout would slash global growth by half a percentage point. In a more likely scenario, given how governments are dithering on emergency financial measures and bungling their public-health responses, it might slash global growth in half, meaning that many countries would fall into outright recession. The world economy faces the “greatest threat” since the Great Recession, the group concluded.
But confronting that great threat will not be easy. A downturn stemming from an epidemic is an unusual one. And it might prove unusually difficult for policy makers to fight, in the United States and abroad.
For one, the coronavirus epidemic has come with extraordinary, intense uncertainty. Officials are not sure how many cases there are and how deadly the virus is. Businesses and households are uncertain of how long the danger will last and what measures governments might take to counter it. People are afraid, as the market panic demonstrates, and it may take months for that fear to abate.