Entering a post-Covid world

Four years ago this month, early reports were coming through from China of a dangerous new virus in Wuhan.  Over the next two years, large parts of the global economy were locked down or restricted. 

But despite the substantial social and health costs, the economic contraction during the pandemic was less severe than had initially been feared; and the recovery process was stronger.  This was partly due to substantial macro policy support, the flexibility and responsiveness of the private sector, as well as the rapid development of effective vaccines.

For the most part, the last wave of meaningful restrictions across advanced economies were lifted from early 2022, allowing for full reopening.  China was the major laggard, lifting severe lockdown measures only at the end of 2022.  Many advanced economies recovered quickly, returning to pre-Covid levels of GDP by the middle of 2021, although there is a gap left to pre-Covid GDP trend.  Substantial GDP was permanently lost as a consequence of the pandemic, as well as the ongoing health costs. 

Back to normal

Despite the rapid recovery, Covid also scrambled the global economy in many ways.  The aftershocks from the pandemic caused the global economy to behave differently, from unexpected inflation dynamics to the expected US recession that never arrived.

The full note is available at: https://davidskilling.substack.com/p/has-covid-ended