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The delay of introducing strong social distancing policies against novel coronavirus in many countries will extend the duration of shutdown and means a deeper confidence shock and an even weaker post-shutdown recovery, warned market research institution Bank of America Global Research. "Both policymakers and the public in many economies have not learnt lesson from China: the most effective policy is a quick and strict lockdown," said a research note from the institute released on Friday.
Asian countries like China, the Republic of Korea and Singapore have shown others how to respond to the COVID-19 crisis effectively, it noted.
In comparison, Europe as a whole and the United States adopted a reactive "rotating restrictions" approach, which will likely result in a much bigger and longer shock to the economy.
If a full shutdown is needed to bend the curve of infection cases, the weeks of partial shutdown are largely wasted, according to the research firm.
"The lack of an effective policy response to control the spread of the virus in developed markets and some emerging markets has led us to take down 2020 global growth to -2.7 percent from 0.3 percent," it said, adding the expected economic shrinkage in 2020 is considerably worse than the recession in 2008 to 2009.
The United States and the Eurozone area would see economic shrinkage of 6 percent and 7.6 percent in 2020, respectively, in comparison with earlier forecast of -0.8 percent and -1.7 percent of economic growth in the year.
A breakthrough in the development of a vaccine or better treatment of COVID-19 would be the biggest upside risk facing the gloomy economic forecasts, said the Bank of America Global Research.
