According to the Moody’s Analytics baseline economic forecast, real global GDP will fall by 4.5% this year as a result of COVID-19. Its base case for the U.S. suggests that it will take until mid-decade for the economy to return to full employment. Mark Zandi, chief economist at Moody’s Analytics, describes the outlook in a new paper, Handicapping the Paths for the Pandemic Economy.

“COVID-19 has caused massive damage to the global economy. Quickly reopening economies will boost growth by unleashing pent-up demand but will also raise the specter of a re-intensification of COVID-19 and another economic downdraft, which could lead to a worldwide depression, said Zandi. “We construct our economic forecasts to help market participants navigate this daunting uncertainty and make better decisions.”

The Moody’s Analytics baseline economic forecast represents its view of the most likely trajectory for the global economy. The baseline forecast is part of a set of 12 forecast scenarios, updated monthly, that project alternative economic paths for more than 100 countries as well as sub-national regions in major markets. These scenarios are driven by different assumptions regarding the epidemiology of COVID-19, demand-side factors including monetary and fiscal policies, and longer-run structural forces such as sovereign debt loads and globalization. To help users, each scenario is assigned a probability based on its relative severity and our view of how likely it is to occur.

“Given the unprecedented uncertainty around the path of the virus and the policy response, we maintain several alternative scenarios that cover a range of possible outcomes to help users assess the impact on their businesses and portfolios,” Zandi said. “Our global team of economists is dedicated to developing scenarios that account for current conditions and the various risks facing economies that may impact their outlook.”

Forecasts are based on the Moody’s Analytics Global Macroeconomic Model, which balances economic theory and empirical behavior and is fully documented and validated. In addition to the probability-weighted monthly scenarios, Moody’s Analytics produces ad hoc thematic economic scenarios that forecast potential outcomes in the event of significant policy shifts or changes to economic fundamentals.