As we emerge from our homes, blinking in the light and ready to get back to work, everyone is asking how quickly our economies can recover from their Covid-19 crunches. Some believe that recovery will be rapid as restrictions ease and that we can quickly resume our previous levels of employment and growth. Others are more circumspect, predicting a slower growth path. And some are pessimistic, arguing we may take years or even decades to get back on track. In this episode, which features content from the Bloomberg Odd Lots podcast, we hear from economist Richard Koo, who is famous for his work on the Japanese economy and the role that debt has played in its long slump. Here, he explains why he thinks we could be facing a tough, global balance sheet recession and why recovery could take far longer than we think. – Felicity Duncan
South Africa is slowly exiting its Covid-19 lockdown, and many business owners are eager to reopen and try to regain lost ground. But, while easing lockdowns certainly mean that economic activity will improve, they offer no guarantee of a return to good economic times.
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The Covid-19 crisis has crushed global economies. It has severely disrupted supply chains and destroyed thousands of businesses and millions of jobs. While these should, theoretically, pick up where they left off once the crisis fades, the reality may be quite different. First, it won’t be business as usual – there will be many long-term changes springing from the need to manage the spread of the coronavirus on an ongoing basis.
Second, the massive monetary and fiscal programmes that governments have rolled out over the last few months have led to a staggering build-up of debt. Households, businesses, and governments must attempt to rebuild the economy in a new, Covid-19 safe way in the shadow of an enormous debt overhang. As economist Richard Koo explains in the Bloomberg Odd Lots content included in this podcast, the process is going to be difficult and very slow.
