The Great Whiplash
Before we become swept up in collective hysteria, we should remember that we were foolish to remain complacent in the initial months after COVID-19 emerged. Dizzy with whiplash, we may prove similarly foolish in assuming that only disaster lies ahead.
MUMBAI – We know from history the devastation caused by the Great Depression of the 1930s, and most of us know from experience the Great Recession following the 2008 global financial crisis. But we have never seen anything like the COVID-19 crisis. The pandemic will leave deep psychological scars, but its most striking feature is the speed and ferocity with which containment efforts have hit the global economy. Call it the Great Whiplash.
In the United States, more than 17 million people have filed for unemployment benefits in the last month. The week of March 28, a record 6.9 million people filed – a figure that would have seemed unbelievable just a few weeks prior, when the weekly norm was about a half-million. The Federal Reserve Bank of St. Louis estimates that by the middle of this year, the US unemployment rate could hit 32.1%, surpassing the previous high of 24.9%, reached in 1933.
From the piecemeal statistics coming out of the developing world, it is clear that the situation there is dire. In its recent Africa’s Pulse report, the World Bank estimates that Sub-Saharan Africa’s economy could contract by 5.1% in 2020 – compared to 2.4% growth last year – with South Africa, Nigeria, and Angola taking particularly big hits. South Africa – which has rightly been praised for its strong early containment measures – has also suffered from the outflow of $1.75 billion in portfolio capital in March, which caused a sharp depreciation of the rand.