Coronavirus: global economy faces historical challenge, with pandemic ‘anxiety’ set to scupper growth
- The European travel ban issued by US President Donald Trump is the latest event to leave economists struggling to gauge the impact of the coronavirus outbreak
- Recession is now expected by most analysts, but the long-term psychological scars to consumer and investor confidence are likely to hamper recovery hopes
Some point to the global financial crisis in 2008, others the 1974 global markets crash, while US Democratic presidential candidate Bernie Sanders said the coronavirus is a crisis “on a scale of a major war”.
“There are precedents, but not encouraging ones,” said Charles Dumas, chief economist at investment research firm TS Lombard. “The collapse of markets and confidence in October-November 2008, and the collapse in 1974 were both dramatic and fairly sudden, with the market down by 50 per cent in both cases.”
In the case of the 1974 crash, the British stock market did not recover to similar levels until 1987, while the United States took 20 years to make back the ground. Indeed, some social media users have pointed out that the drop in share prices in Britain “since January was the biggest three month drop since the South Sea bubble burst in 1720”. On Thursday, US markets had their worst day since 1987.
I personally think we're in a global recession right now and the [coronavirus] shock was the tipping point. But going into 2020, the global economy had already slowed significantly