Economic impact of the Corona pandemic: Costs and the recovery after the crisis

Abstract

Since the outbreak of the Corona virus, policymakers around the globe introduced numerous emergency measures such as the wearing of masks, restrictions to mobility and travel and the shutdown of large parts of the economy, including firms, workplaces and schools. The implementation of restrictions (lockdown) helped to keep the number of infections below the capacity of health care systems in most countries. While many human lives have been saved, the lockdown contributed to a severe recession at the global scale. This paper examines the economic costs of the Corona virus and the prospects for a solid recovery. Increased uncertainty of private households and firms and the building of buffers against future shocks, lower productivity due to a reversal of the globalization process and a non-optimal policy mix generating inefficiencies and potential risks arising from asset markets can prevent a return to the pre-crisis steady state.