Covid-19 and the financial crisis: Comparing apples and oranges

Ilustratīvs attēls no
Mortens Hansens, ekonomists

The pandemic and the financial crisis were of course caused by very different events and one should therefore be careful at comparing them – but they both had a tremendously negative impact on GDP and therefore some comparison may be enlightening.

The great lockdown started just over half a year ago but the impact on GDP was very swift. The second quarter of 2020 saw declines in GDP that were bigger than the cumulative losses from the financial crisis in a majority of EU countries, see Figure 1.

In fact, the financial crisis was only more costly by this measure in Greece, the three Baltic countries, Ireland, Finland and (only just) in Luxembourg and Romania. For all other countries, the pandemic has been more costly in GDP terms than the financial crisis.

Figure 1: Impact on GDP from the corona crisis and from the financial crisis

Corona impact: Q2 2020 as compared to Q2 2019

Financial crisis: Accumulated impact on GDP from peak to trough*

Source: Eurostat and own calculations

* Typically 3-8 quarters. In Greece’s case some eight years while Poland did not face a recession at all. For Latvia the recession lasted 11 quarters with a cumulative GDP drop of 23.1%.

The following is to some extent a mixing of apples and oranges but I think it makes some sense nevertheless. Why not add up** the declines from the financial crisis and from the pandemic to construct what one could call a “Misery Index”? The result is seen in Figure 2.

Figure 2: “Misery Index”. GDP loss from the financial crisis (% of GDP) and GDP loss from the pandemic (% of GDP) put together

Source: Eurostat and own calculations

Some conclusions from what at first looks like a mixed bag of distinctly bad outcomes:

  • A fairly clear distinction between the richer North and the somewhat poorer South prevails. The latter have suffered quite a lot more.
  • Poland is close to being unique with a very limited overall impact – Greece is unique with a tremendous impact on GDP that puts it near (or at) the bottom of the EU in terms of GDP per capita. In 2008 Greece was the 15th richest EU country, in 2019 it was only ahead of Bulgaria and Croatia (and, yes, behind e.g. Latvia, Poland, Hungary and even Romania). 2020 may worsen this position; an overall historic decline in an EU context.
  • The United Kingdom – pandemic and Brexit are both detrimental to the economy; together they are almost lethal.
  • Latvia – what can I say except thumbs up for the comeback kid of the financial crisis? Another comeback should be on its way, fingers crossed.


Morten Hansen is Head of Economics Department at Stockholm School of Economics in Riga and Vice-Chairman of the Fiscal Discipline Council of Latvia.

** Yes, one should beware of adding ratios that do not have the same denominator – I do it nevertheless….

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