Across time and countries, financial crises and, more broadly, recessions and recoveries, have had much in common. Recessions predominantly impact the demand side whereas the influence on the supply side is more limited. This time is different. The pandemic-induced recession will have a longer lasting influence on the allocation of household expenditures, if not on the level of spending. More than a normal recession, it will also have major repercussions on the supply side, through changes in global value chains, working from home or the disruption of the economics of businesses which are confronted with a forced capacity reduction on social distancing grounds.
Economic activity contracted sharply in February, the first month of the lockdown, before rebounding very gradually in March and April. The recovery is bound to be very slow after this brutal first-quarter shock [...]
