THE EFFECT OF COVID-19 ON THE GLOBAL RECESSION: HYSTERESIS SCENARIO

Abstract

Despite the macroeconomic policy supports applied on a global scale, the Covid-19 epidemic caused the collapse of economic activities around the world. The fall in commodity and oil prices, tightening financial conditions, production declines, declines in employment and per capita income reveal the dimensions of the global recession. It is expected to cause the sharpest contraction of the last 60 years in almost all indicators of the global economy. This is because in previous global recessions, services-related activities were relatively more resilient. However, the Covid-19 shock has led to an abrupt halt in services-related activities. Along with the weakening in the services sector, peak declines were experienced in global trade and oil consumption, industrial production and retail sales. The current unemployment rate is expected to reach its highest level since 1965. The contraction in the GDP of the countries was triggered by the measures taken against the epidemic and inflicted deep and difficult wounds in the long term. Probably the process will evolve into hysteresis. Even if the global economic recovery gains momentum, it would be extremely wrong to hope that production will return to the level expected before the epidemic. This study deals with how the supply shocks experienced as a result of the epidemic affect country groups at the global level. It has been tried to determine the economic effects of the Covid-19 epidemic process with the data obtained from the World Bank (WBG) and the International Monetary Fund (IMF).