There have been over 9 million reported cases of Covid globally and over half a million reported deaths, around 0.01% of the global population.1 As a point of comparison, the Spanish flu of 1918 recorded 33 million deaths or close to 2% of the global population back then.2  During the first few months of the year, and unlike in 1918, most countries put in place social distancing measures to contain the spread of the virus, albeit at different times and with differing degrees of stringency (Chart 1). Predictably – indeed, intentionally – these measures severely curtailed movement of goods, services and peoples, constricting economic activity across a very wide range of sectors and countries. 1  Data from European Centre for Disease Prevention and Control. Estimates of the death toll are uncertain. The number quoted here averages the mid-range of estimates in Patterson and Pyle (1991), Johnson and Mueller (2002) and Spreeuwenberg et al (2018).
The economy will also, though, be shaped by the behavioural responses of households and businesses, and the policy responses of Governments and central banks, to these shocks. Understanding those responses is the purpose of my comments today. I will partition my assessment of the economic impact of the Covid crisis into four phases, or “quarters”, covering the past, present and near and distant future. The first “quarter” covers the initial impact of the virus; the second, the immediate recovery following these shocks; the third, the second-round effects on spending and employment; and the fourth, the longer-run impact on households and businesses. Both the UK and the global economies are already well into the “second quarter” – the recovery phase. The UK’s recovery is more than two months old, while the global economy is perhaps three months into its recovery, in both cases from an exceptionally low starting point. Let me say a little about each of the phases, before concluding on the role of policy in supporting the economy during the Covid crisis. “The First Quarter”  The Covid-19 crisis has dramatically affected public health in every country in the world.