In Peru, even with the suppression policy adopted, its impact is negative on both public health and economic activity. ĬOVID-19 is a contagious disease that has generated high economic and social costs in the world. This scenario adjusts to a global drop in economic activity of -4.4% for the second quarter of 2020. The main economies have fallen in the first quarter of the year on average -5%, and the strongest economies such as the United States (US) and European Union (UE) countries are expected to fall to -7.1% and -9.3% respectively for the year 2020. There is a scenario of generalized recession at the level of developed countries and in developing countries, it is greater. However, there are important differences between countries. The International Monetary Fund (IMF) projects negative growth for all regions in 2020. These changes appear because consumption and work increase the risks of infection for people who are not immune to the virus. The key feature is that an epidemic naturally generates negative changes in both consumer demand and labor supply. įrom Barro, it is possible to say that a productivity shock generates co-movements in macroeconomic aggregates. The internal shock, being of greater impact, is associated with the COVID-19 disease due to the suppression policy to prevent contagion (quarantine), which affects employment and aggregate supply and, therefore, affects aggregate demand through lower consumption and savings or debt and private credit in the short-term and lower investment and capital accumulation in the long-term, which is evident in the dynamics of economic activity. The external shock implies a contraction in the prices of raw materials, in the demand for exports, employment, income, tourism, international remittances, and external financing.

For developing countries such as Peru, the impact is twofold: an external shock and an internal shock that affect aggregate supply and demand. COVID-19 has become an epidemiological and economic Global Pandemic.

Systemic shock