For more than six months, the world has grappled with the severe health and economic consequences of the COVID-19 pandemic. Global economic activity collapsed in the second quarter of 2020, when about 85 percent of the global economy was in lockdown for several weeks. As the International Monetary Fund (IMF) first stated in its April World Economic Outlook, this is without historical parallel.
In its severity, the Great Lockdown of 2020 has naturally evoked comparisons to the Great Depression, which began in 1929. But today’s crisis is truly like no other. Although it’s too early to make a definitive judgment, we can already say that the severity and speed of the declines in economic output, employment, and consumption during the Great Lockdown were far greater than at the onset of the Great Depression. In just one month, from March to April, the U.S. unemployment rate roughly tripled to 14.7 percent, a level not reached in the Great Depression for nearly two years.
Equally unique has been the sharp rebound of output, consumption, and employment. With more than 80 percent of countries easing lockdown restrictions, the global economy has begun to recover from the depths of the downturn. The speed of this turnaround is also in dramatic contrast to the Great Depression, during which negative growth persisted for four years and the cumulative global contraction far exceeded that which is projected for the Great Lockdown.
The ongoing recovery is the result of the easing of lockdown restrictions as well as the rapid implementation and unprecedented scale of supportive policies by the world’s central banks and governments—a third major distinction from the Great Depression. This crisis, however, is far from over. The recovery remains very fragile and uneven across regions and sectors. To ensure that the recovery continues, it is essential that support not be prematurely withdrawn.