Policymakers do their utmost, but some damage already done

The UK Chancellor’s support for self-employed workers takes the total size of the government’s package of direct tax and spending measures to £119bn (5.3% of GDP). Even so, this unparalleled policy response won’t prevent a precipitous drop in economic activity in Q2. And the big risk now is that many more people are made unemployed, many more businesses fail, and firms and households become more reluctant to spend even once the virus is under control. That could mean that the recovery is slower and more protracted than we are currently expecting.