|Opinion: Why economic data, indicators and forecasts don’t mean much in the corona storm By Pierre Briançon, Published: April 1, 2020 at 7:34 a.m. ET MarketWatch|
How deep will the world recession be this year? Don’t look at current economic forecasts for any guide. The only certainty is that measures of containment to fight the coronavirus pandemic, with lockdowns and a halt of economic activity in most western countries, will shrink gross domestic product in most of the world. By how much? These days, your guess is as good as mine.
The main reason is that “uncertainty” is no longer one of those potential risks envisioned by economists to caution about their own forecast. Uncertainty isn’t a marginal danger hovering over the economy, as the threats of trade wars or Brexit were when mentioned only a few weeks ago. Uncertainty is now the economy itself. In this context, the only accurate forecast is: “it depends.”
It depends, first, on the length of the lockdowns. The Organization for Economic Cooperation and Development, whose economic studies are among the most reliable, estimated this week that each month of containment costs any given country some 2 percentage points of growth. A three-month lockdown — say, from mid-March to mid-June — would cost 6% of GDP. Europe was expected to grow less than 1.5% this year in the last pre-virus forecasts. If the OECD is right, that means Europe’s economy would shrink this year by about 4.5%.