Coronavirus: Recession in the Western world – Danske Bank

The COVID-19 crisis is a ‘black swan event’. It is a global shock, which was deemed improbable, yet it will cause massive consequences.  Thomas Harr, PhD, Global Head of FI&C Research at Danske Bank predicts a recession. 

Key quotes

“I now believe that we are facing a recession in the Western world.”

“The policy response should involve (a) policies to contain the virus, (b) targeted fiscal, monetary and regulatory measures to support companies and people facing liquidity shortages, supply chain disruptions and tightening credit constraints, and (c) measures to support aggregate demand. This week, policy makers ramped up their response particularly with respect to a) and b), but less so with respect to c).”

“The ECB will have to play an important role as crisis manager, in particular with respect to Italy. Moreover, I am doubtful that Lagarde will be able to convince politicians to obtain the appropriate fiscal response.”

“The expected slowdown in new people infected by COVID-19 during spring suggests that the recession in Europe and the US will be relatively short-lived, but uncertainty is obviously extraordinarily high.”