Reopening from the Great Lockdown: Uneven and Uncertain Recovery

Gita Gopinath over at the IMF:

This crisis like no other will have a recovery like no other.

First, the unprecedented global sweep of this crisis hampers recovery prospects for export-dependent economies and jeopardizes the prospects for income convergence between developing and advanced economies. We are projecting a synchronized deep downturn in 2020 for both advanced economies (-8 percent) and emerging market and developing economies (-3 percent; -5 percent if excluding China), and over 95 percent of countries are projected to have negative per capita income growth in 2020. The cumulative hit to GDP growth over 2020–21 for emerging market and developing economies, excluding China, is expected to exceed that in advanced economies.

Second, as countries reopen, the pick-up in activity is uneven. On the one hand, pent-up demand is leading to a surge in spending in some sectors like retail, while, on the other hand, contact-intensive services sectors like hospitality, travel, and tourism remain depressed. Countries heavily reliant on such sectors will likely be deeply impacted for a prolonged period.

Third, the labor market has been severely hit and at record speed, and particularly so for lower-income and semi-skilled workers who do not have the option of teleworking. With activity in labor-intensive sectors like tourism and hospitality expected to remain subdued, a full recovery in the labor market may take a while, worsening income inequality and increasing poverty.

More here.