Among other things, experts predict it will expand the gap between the rich and poor and increase the debt to unprecedented levels.
As MarketWatch reports:
Post-pandemic recovery will experience effects that persist after the initial cause — the coronavirus — cease to have an impact. There are several operative elements to consider:
1. The crisis will continue to destroy wealth: During the Great Recession, the U.S. lost around $10 trillion from drawdowns in savings, falling values of houses and investments. After the COVID-19 crisis, depleted savings will affect consumption levels. Longer-term, rising stock- and house prices may restore wealth, but only for those not forced to sell. The effects will be most damaging among people in lower socio-economic groups who are forced to spend more than they can save.
2. The crisis will leave a legacy of debt: Household, business and government, many already highly indebted, will experience sharp rises in borrowing to cover cash-flow shortfalls. With around half- to two-thirds of the government support packages structured as loans, indebtedness will grow substantially.
For households and businesses, the need to meet debt obligations will restrict future spending and investment as they are forced to deleverage. Slower rebounds in real estate and financial asset prices will exacerbate the damage. A decade after the 2008 crisis, millions of homeowners still had mortgages greater than the value of their homes. For those who default, the effect on credit scores will restrict future ability to borrow, restricting their participation in the economy.
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