China’s central bank has warned the international community to be alert prepared for a possible second “Great Depression” after the Covid-19 outbreak, although it said the chances of this occurring are low.
“The possibility of a ‘Great Depression’ cannot be ruled out if the epidemic remains out of control and the deterioration of the real economy is exacerbated by an eruption of financial risks,” said Zhu Jun, director of the international department of the People’s Bank of China, quoted by the local media last week.
The difficult choice between the need to protect public health and the economic cost of shutting down almost all activities has prompted warnings from many world economists who believe that the Covid-19 economic shock may be more severe than that caused by the global financial crisis in 2008 or even the data that was triggered by the Great Depression, which started with a fall in Wall Street in 1929, with frozen credit markets, huge bankruptcies, US GDP falling by more than 10% and unemployment rates reaching 25 %. It ended ten years later.
Economists believe that even if there is a global contraction, it will not be as severe as the crisis of the 1930s. The economy should recover naturally when restrictions are lifted, they argue. However, there is already evidence that Covid-19’s impact is causing massive unemployment in the USA.
