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Market hysteria over coronavirus may have seen hundreds of points wiped off indexes around the world this week, but in this Oxford Science Blog, Oxford University experts maintain the COVID-19 crisis should not necessarily foreshadow an economic downturn.

Professor Simon Wren-Lewis, economist and expert in the impact of pandemics at the University of Oxford, maintains that modelling he undertook after the 2008 global financial crisis, shows the coronavirus crisis should have a short-term impact and need not have a long-lasting effect on the UK economy. This view was echoed by Rishi Sunak, the new Chancellor of the Exchequer,  during this week’s Budget speech [11 March], when he said the impact of the coronavirus will be ‘temporary’.

Professor Wren-Lewis says: ‘Ever since the global financial crisis (and perhaps before) we have become obsessed with markets and, in particular, their imagined predictive power.’

He added: ‘Looking at the markets, it appears the economic impact of coronavirus will be huge and permanent. In contrast my own study, and others we refer to, suggest something very different: that coronavirus will lead to a large negative shock that will be short term, and certainly will not be permanent. So who is right?’

Based on a three-month virus crisis, Professor Wren-Lewis said his modelling study showed, there is a danger of firms going bust, as we have already seen in the airline sector. But, this week, the banks have said they will support hard-hit businesses and the 2009 study showed that, once the virus is over, firms will become viable again.

Read the full blog on the University of Oxford website