GLOBAL ECONOMIC ENVIRONMENT Second quarter 2020
Dr. Vicente J. Pallardó
Economic Analyst and Senior Researcher at the Institute of International Economics (IEI)
The consequences of COVID-19 continue to determine the international economic landscape. After a first quarter of 2020 that will go down on record as the worst ever in terms of economic growth (in peacetime), particularly as a result of the impact on developed countries, our attention turns to three key issues: the pace of an economic recovery that is beginning to be felt, the potential spread of the seriousness of the crisis to regions less affected in the first half of the year and the repercussions of a more structural nature that will be the true economic legacy of the pandemic. All of this, of course, comes with the uncertainty of not knowing the extent to which, if at all, the SARS-CoV-2 virus will again wreak the individual and economic devastation caused in recent months in a potential future wave.
In the first section of this Quarterly Report, Economic Climate and Trends, we’ll summarise the situation at the end of the first half of 2020 caused by the impact of the coronavirus and the response to it from private and, in particular, public leaders. In our Ten-Point Analysis we’ll review the most important elements that define the state of world economy at this time, with a special focus on the expansionary monetary and fiscal measures accumulated over recent months, and the reversal in negative trends that began to be felt from May on in a number of sectors (not all) of the global economy. Finally, our Under the Microscope feature section looks at one of the structural legacies of the pandemic that will condition the future over coming years or even beyond: how to tackle exorbitant public debt which, already at an excessive level before the outbreak of the crisis, has risen to unprecedented levels in the response to it. We’ll provide the data and analyse the variables upon which the sustainability of these fiscal measures depend. We’ll look at how similar excesses have been corrected in the past and we’ll try to respond to the reasons why, confronted with an extremely high accumulated level of public debt, most political economists and financial market operators appear less concerned than at previous times when debt wasn´t even approaching the heights set to reach by the start of the 2030s.