Image of the Millennium Bridge in London.

The Q1 Global Economic Conditions Survey (GECS) was conducted from 28 February to 12 March inclusive. This period included the spread of COVID-19 to Europe and the US, and saw some of the initial policy responses, mainly from central banks. The major impact on economic activity had not yet begun to be felt.

However, such effects were being felt quite profoundly in the Asia-Pacific region, the source of the outbreak. This geographical split is reflected in the Q1 GECS.

Global confidence fell to its lowest level on record with big falls in all regions. In Asia-Pacific, confidence is the lowest among all regions and the orders balance fell by more than anywhere else in Q1. In addition, the regional index of concern about suppliers going out of business jumped to a record high of 22 in Q1 compared with a long run average of 8. 

COVID-19 – economic impact and policy response

The global economy is heading into recession as private economic activity collapses, owing to an effective lockdown in many countries – falls in output of over 10% are  entirely possible. Emerging market (EM) economies face additional difficulties as a flight to quality among investors triggers capital outflows. For oil exporters, the collapse in oil price will exacerbate the situation by putting pressure on government budgets.  

The global policy response has been huge. Central banks have slashed interest rates, launched or massively boosted quantitative easing (QE) and extended cheap funding to the banking system.

Governments are supporting private incomes lost as a result of the crisis: they are making direct payments to households, paying the wages of workers, boosting benefit payments and delaying or foregoing tax receipts. The intention is to provide a ‘bridge of income’ so that when economic conditions improve, a recovery can be fairly quickly established.

The total size of fiscal packages is very substantial, many worth around 10% of GDP (by end-March). It is a measure of the scale of this crisis that concerns are being expressed that more may yet be needed.