While the short-term economic impact of the crisis is substantial and requires ample monetary policy support, the longer-term outlook is much less certain. It depends in particular on the extent to which the effects of the crisis exert prolonged pressure on supply and demand conditions, and on the strength and speed of fiscal and structural policy responses.
Fragmenting world trade is likely to redirect the focus of supply chains from short-term efficiency to increased resilience. This will lead to a shortening of supply chains and a reshoring of production. At the same time, a surge in corporate indebtedness could make firms riskier and weigh on their capacity for investment.