Recession or depression? Length of global economic standstill likely to decide

Although the actual economic fallout of the COVID-19 pandemic is clouded by uncertainty, experts agree the longer the global economy remains at a near-standstill, the more difficult will be the return to normalcy.

Last week, the International Monetary Fund issued a grim forecast, predicting the world economy would suffer its worst year since the Great Depression, while Canada’s economy was expected to shrink by 6.2 per cent.

“I think the question is going to be how much of this crisis that we are experiencing is a permanent change or a temporary change,” says University of Winnipeg Economic associate professor Stefan Dodds.

“So if we think that within a month or two we have the pandemic under control and aren’t so worried about disease transmission and things can rebound quickly.”

Dodds says the longer the shutdown persists, the more likely it is businesses will go under and jobs will be lost permanently.

How long the window for a speedy recovery will remain open is anyone’s guess at this point, but according to a report released today by Statistics Canada, 34.5 per cent of Canadian workers expressed concern they could lose their job or main source of income within the next four weeks.

Keeping people on the payroll may be what separates the country from entering a recession or depression.

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“I think the idea is we need to try and keep as many of these businesses going as possible so when we get over this crisis they can start up again,” says Dodds.

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