8 Real and financial lenses
to assess the economic
consequences of COVID-19
Catherine L. Mann
Citi
A dramatic pivot in prospects and markets marks the impact of the novel coronavirus
on countries and the global economy, from January’s prospects for an upturn in
global growth and record highs in US equity markets to February’s downgrades of
global growth and market corrections. The aggregate assessments mask substantial
heterogeneity in impact on countries and sectors depending on their relative intensity
of cross-border manufacturing supply-chain linkages, domestic and tradeable non-
storable services, and energy and commodity prices. Crucial to the evolution of these
economic data will be the behavioural responses of authorities, businesses, consumers,
and policymakers, for which uncertainty and confidence play an important role.
- The appearance of the novel coronavirus (COVID-19) dashed prospects for an
upturn in global growth.
Incoming data at the end of 2019 were favourable: Citi’s Economic Data Change
indicators were rising toward outright expansion; leading indicators of sentiment were
turning up; and Citi’s Financial Conditions Index was easing further, as central banks
generally were taking advantage of the Federal Reserve’s policy rate cuts in 2019 to
ease as well. In emerging markets, fiscal policy was also generally supportive. Even
though hard data were somewhat mixed, it did look like the downgrades of 2018/2019
were over and that the global economy was poised for an upturn. Concerns in the data
included trade prospects, which were continuing to weaken as measured by the container
throughput index and export orders. There were also concerns that the accommodative
financial conditions were showing up in market valuations but were not being passed
through to faster GDP growth.