The enormity of the loss of output in April means many countries will initially enjoy a quick, strong rebound, with double-digit growth in many indicators—creating the illusion of a swift return to normal.
However, the depth of the contraction presages a steep climb back, particularly amid uncertainty over when and whether a vaccine will arrive. Economists at Bank of America expect the U.K. economy to grow 9% between April and June. But that would still leave it 18% smaller than before the crisis.
The Organization for Economic Cooperation and Development expects the global economy to contract by 6% this year, with U.S. GDP falling by 7.3%. If a fresh round of lockdowns can be avoided, it expects the global economy to grow by 5.2% in 2021, leaving it smaller than it was before the pandemic struck. A full recovery would only take place in 2022, or later.
The economic pain associated with draconian lockdowns left few corners of the global economy unharmed.
On April 13, Russian florists gathered in St. Petersburg to destroy some 5 million tulips, chrysanthemums and lilies to draw attention to their plight. In Kenya, workers at the Maridadi flower farm were throwing away a quarter of a million roses a day in early April as Europe’s shutdown throttled demand.
“That was the worst time and it hit us hard,” said Jack Kneppers, Maridadi’s owner.
Uganda, one of Africa’s top sugar exporters, which produced 500,000 tons last year, didn’t ship a single kilogram of sugar in April, according to data from the country’s central bank. In South Africa, mining production in the key platinum and gold producer plunged by nearly half.
Business activity in India’s service sector was almost wiped out overnight as the government rolled out one of the most aggressive lockdown policies in the world starting in late March.
The startling scale of the contraction in India’s services sector shows up in measures of activity compiled by IHS Markit. The Purchasing Managers Indices, as they are known, are based on surveys of around 30,000 businesses around the world.
A PMI above 50.0 points to a rise in activity, and a measure below that level points to a decline. Usually, the PMIs hover around the 50.0 mark. For April, the PMI for India’s services sector stood at 5.4, the lowest ever recorded anywhere. Equivalent measures for France and Italy weren’t much higher. In the U.S., it stood at just 26.7.
“To see the numbers come down to single digits, it was inconceivable,” says IHS’s Mr. Williamson, who has been helping compile the PMIs for a quarter of a century. “We never thought that could happen. You’re into totally uncharted territory.”
The April figures are a useful guide to how damaging severe lockdowns can be. While most countries have been easing restrictions, it is possible fresh measures will be needed if there is a surge in coronavirus infections later in the year.
The OECD calculates that a second wave of lockdowns later this year could cause the global economy to contract even more sharply, by 7.6%. The expected recovery in 2021 would also be weaker, with global output expanding by just 2.8%, leaving the economy much further away from a full recovery by year’s end.
But it is unlikely the global economy would suffer another April. Governments are learning how to manage the virus, and future restrictions are unlikely to be as broad-based as the initial response.
“Even if we see some containment measures come back, they won’t be on the same scale,” said Laurence Boone, the OECD’s chief economist. “We know more about the virus, and they would be more targeted. The period of confinement would be lighter.”