Annual Economic Report 2021 - BIS

A bumpy pandexit

Introduction

It is now over a year since the Covid-19 pandemic struck out of the blue, plunging the global economy into a historically deep recession. An acute health crisis turned into an overwhelming economic crisis, as policymakers adopted stringent containment measures to save lives. This was a recession in response to an insidious invisible enemy.

A timely, forceful and concerted policy drive prevented the worst. Working together, monetary, fiscal and prudential authorities managed to stabilise the financial system and cushion the blow. They put the patient in a state of suspended animation.

But as last year’s Annual Economic Report (AER) went to press, uncertainty still reigned: what would happen next? There was hardly any precedent to serve as a benchmark. No recent pandemic was remotely as damaging as the current one. And the Spanish flu outbreak was too distant and too different. Many central banks suspended publishing forecasts, turning to tentative scenarios instead.
Where do we stand today?

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