2020 will forever be remembered as the year of the COVID-19 pandemic, which led to the most severe economic contraction in almost 100 years.
In addition to COVID-19, 2020 was also memorable for other developments:
- As the world ground to a halt in March, policy responses were similarly unprecedented in terms of the scale of interventions by central banks and governments, providing a financial bridge for households and companies to the other side of the pandemic.
- A new €750 billion rescue programme, to be funded through a commonly issued bond, was a big first step towards fiscal integration in the Eurozone.
- Donald Trump failed to secure a second term as US President.
- Vaccine developments set the stage for a broader economic recovery in 2021; up until then, best case scenarios were mainly built on government stimuli and “lower for longer” interest rates.
- The latest wave of the pandemic could hinder economic recovery into the first quarter of 2021. From then on, activity should rebound as vaccines are widely deployed and social distancing restrictions ease.
Continuing monetary and fiscal support will be crucial.
