Economic effects of Covid-19 in Luxembourg: First RECOV id working note with preliminary estimates.

While medical staff has been serving on the front lines since early March, each research discipline aims to offer its humble contribution to the battle against the pandemic. The public health crisis and the measures implemented to make it less severe are more than likely to lead to a deep economic recession which opens up the possibility of systemic collapse of the global economy or of the European financial market. Unsurprisingly, leading economists around the world have suggested plans of actions to mitigate economic damages from Covid-19. Yet, lack of hindsight and information available for research at present makes any forecasting exercise difficult.

In a working note released on April 6, RECOV id – a group of economists based in Luxembourg who join forces to assist the Task Force for the Coordination of the Public Research Sector in the Context of the Covid-19 Pandemic (Work Package 7 led by Aline Muller) – aims to rough out the subject and provide knowledge on the economic issues related to the Covid-19 crisis. The working note provides a summary of ongoing research as well as back-of-the-envelope estimations of the “direct” economic impact of the health crisis and resulting policy measures. It discusses forces that may drive to a breakdown of the global economic system and policy options that are available to decision makers to mitigate the short-run costs and the risk of a systemic collapse. It also provides suggestions for future research (...)