With lockdown due to coronavirus, is the world staring at another Great Depression?

Edited By: Sonal Gera WION Web Team
New Delhi, Delhi, India Updated: Mar 22, 2020, 10:50 PM(IST)

United Kingdom Photograph:( AFP )

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The lockdown across the world due to the coronavirus outbreak has brought the world to an economic halt — the brink of an economic depression. 

The coronavirus broke out of quarantine from China and spread to Italy, Spain and other European countries. The entire world is, as a consequence, in a lockdown in order to stem the growth of the novel virus. 

But this lockdown has brought the world to an economic halt — the brink of an economic depression. 

Reports say Central banks and governments have introduced interest rate cuts, loan guarantees and new spendings. And this is just the start. 

A depression at this time would mean an almost exact repeat of the same period one hundred years ago — during the early 1930s.

The American economy is now facing a plunge into a similar territory — because of the coronavirus pandemic — with businesses shutting down. Experts say this is not just a blip, and that economies, especially, the United States has never seen anything like this.

More than the large-scale companies, the smaller ones are hit harder, mainly because of their limited access to credit and less cash in the bank.

The unemployment rate is also expected to hit a low — as much as 10 per cent — in US, trickling down to the world.

In addition, leading academic economic experts across Europe believe a major recession is a likely consequence of the coronavirus pandemic, whatever the death toll.

According to The Guardian, a deeper recession for the UK is likely, with a central forecast showing zero growth at the end of the year downgraded to a 1.4 per cent decline.

Economists estimate about 14 million jobs in the leisure and hospitality sector alone are at risk due to mandated shutdowns.

If the virus spreads more broadly and has a higher mortality rate, the economic effect would be proportionately greater. A strong rebound — a V-shaped recovery — is what’s required, which only a few can see at the horizon.

During the Great Depression, it was Franklin D Roosevelt’s stragties that helped a larger part of the world get back on track. It remains to be seen how the world, and especially the US, deals with the impending doom.

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