ifo Institute / EconPol Europe: Experts See Global Economy Contracting by 4.4 Percent

Experts worldwide expect economic output to shrink by 4.4 percent in the current year. The recovery is likely to be slower than the crash (plus 3.2 percent in 2021). In many places, it could take until at least 2022 for the economy to return to its pre-crisis level. This is shown by a survey of 950 economic experts from 110 countries conducted by the ifo Institute and the EconPol Europe research network. The experts cite liquidity support for small and medium-sized enterprises and improvements in health care systems as the most effective economic policy measures. Economists from countries where short-time work is in use are the ones most likely to see it as a particularly suitable tool.

The experts surveyed have widely differing expectations of how long the recovery will take. Looking at all respondents together, more than one-third (36.4 percent) expect economic output to return to pre-crisis levels in 2022. By contrast, 19.4 percent believe that a full recovery will not set in until 2023. Meanwhile, 24.4 percent are more optimistic and expect a full recovery as early as 2021, while 15.7 percent assume that it will come only after 2023.

According to the experts, the most effective economic policy measure is liquidity support for small and medium-sized enterprises. On a scale of 1 to 6, such support is rated on average 5.0. This measure is rated highest in the EU, the US, and other advanced economies. For experts in emerging and developing countries in Asia, Latin America, and Africa, improvements in the health care system are at the top of the list of priorities.

Furthermore, respondents consider temporary tax deferrals for companies (4.4), short-time work (4.3), and additional childcare provision (4.2) to be good policy measures in most groups of countries. The exception is the US: here, the experts think much less highly of temporary tax deferrals (3.4). While liquidity support for larger companies (4.0) is also considered important, respondents see it as much less relevant than support for small and medium-sized enterprises.

The survey was conducted August 12–29, 2020.