The Covid-19 pandemic has resulted in an unprecedented shock to the global economy. The Covid economy impact has resulted in disruption to both supply and demand in the world economy. Covid infections have reduced the labour supply and impacted productivity, while lockdowns, business shutdowns and social distancing requirements have also resulted in supply disruptions. In terms of demand, layoffs and the loss of income (caused by quarantine shutdowns and unemployment) have worsened economic prospects for household consumption and investment by business.
The extreme uncertainty about the duration and impact of the pandemic could result in a vicious cycle of reduced business and consumer confidence which could then lead to ever worsening financial conditions. Key challenges for any economic analysis of the impact of the pandemic must take into account the difficulty of measuring economic indicators given the uncertainty of any forecasts and the unprecedented nature of current conditions.