COVID 19 Recession Vs 2008 Recession

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ECONOMIC CYCLE

Recession refers to a phase of the down turn in the economic cycle when the re is a fall in the country’s GDP for some quarters.
It begins after the economy reaches a peak of activity and ends as the economy reaches its trough.
A common rule of thumb for recessions is two quarters of negative GDP growth.

Whereas 2008 was induced by a financial sector crash that spilt over to the real economy.
Covid-19 is a health crisis that has turned into an economic crisis with complex political, security and behavioral dimensions.
There was no restriction placed on physical movements and travel and trade in 2008.
Whereas, it has been a hallmark of the current situation.
This is important, because it complicates policy-making.

The US and UK took the lead in managing the previous crisis given their status as leading financial centres.
They were able to respond effectively in a way that provided assurance and comfort to markets
With leaders like Boris Johnson and Donald Trump at the helm of the leading Group of Seven (G7) industrialised economies, the response to the crisis has been a bumbling one.
The result has been two fold:

The global poitical economic architecture is fundamentally different today than in 2008.
With multilateralism in retreat, finding consensus has been a difficult endeavour
Europe’s response has been fragmented and the US’s delayed, while Asia’s has been far more comprehensive.
To effectively create confidence and calm in markets, a synchronised global health-care, fiscal and monetary response involving governments, central banks and key multilateral organisations like the World Health Organisation, IMF and World Bank will need to be forthcoming.

Back then the world had enjoyed a period of strong growth in preceding years,
Driven by a China – induced commodity super cycle.
Globalised free market capitalism was widely accepted as the dominant economic model
During 2008, policymakers still had a number of levers available to combat the contagion.
Today firepower on the monetary policy side is now reduced and may no longer be able to do as much heavy lifting.
Fiscal stimulus measures will be required to support ailing economies, but these will need to be unconventional and creative.

The uncertainty, mis information and disinformation on these platforms fuel mass panic and hysteria.
This erode confidence and drive irrational behaviour.
The result is a herd mentality that is manifested in panic buying

Depression is a prolonged period of economic recession marked by a significant decline in income and employment.
When recession, turns out to be more severe and continues for a long term.
A common rule of thumb for depression is a negative GDP of 10% of more, for more than 3 years.