Economic growth rates have been falling, and will continue to fall further...

Real GDP growth has collapsed by more than half compared to one generation ago, very similar to the lower growth of working age population (which will halve again over the next generation). Productivity growth has been plummeting. Companies and governments are reluctant to invest. Restrictions protecting the environment/health/safety/etc have deepened, and spread to more countries. Overpopulation of a finite planet has devastated ecosystems/communities, and depleted the resources that fueled industrial expansion...

Stimulus from monetary or fiscal sources just patches over the structural issues, without solving them at all. We have to acknowledge that growth will be lower. A minority of the 7.8 billion people on Earth live affluent lifestyles that can't be sustained. With population growth slowing towards zero in the second half of this century, we need to plan around a long-term stabilisation of the human population (preferably closer to 9 billion instead of 11 billion). Ecological footprint and Doughnut Economics are two frameworks to view this through.

https://www.dhirubhai.net/pulse/gdp-financial-reporting-poor-measure-wellbeing-life-david/

I've previously argued that GDP overstates the growth in economic activity. With Developed Countries likely to grow by less than 1% real GDP per annum in coming decades, and World GDP growth decelerating from 3% towards 1-2% eventually, we have to acknowledge that quality of life will fall for a larger and larger number of people:

According to a recent paper from the Reserve Bank of Australia (Potential Growth in Advanced Economies by Ivailo Arsov and Benjamin Watson in December 2019): "the overwhelming evidence is that potential growth in the advanced economies has declined since at least the mid 1980s. The decline has been driven by slower population growth and ageing, slower investment growth and weaker productivity."

Potential growth is the rate that an economy can sustain over the medium term without generating excess inflation. Growth has declined in the Advanced Economies in recent decades due to lower growth in the labour force, capital stock and productivity according to the RBA. Current projections and long-term growth expectations suggest that the low rates of potential growth in advanced economies will persist for some time...

GDP growth in Advanced Economies has significantly slowed over the past four decades, and this is consistent across the United States, Europe, UK, Japan, Canada, Australia and New Zealand. The decline has been most pronounced in Japan (from 4.0-4.4% per annum thirty years ago, to only 0.5-0.8% now), due to slowing population growth and the related slowing in capital accumulation. The decline in world growth was interrupted in the late 1990s and early 2000s, when potential growth increased because of widespread adoption of information and communication technology led by the United States. The declines accelerated during the Global Financial Crisis, because this had long lasting economic effects. Although potential growth has picked up a little since 2013, it is currently only around half its rate in the mid 1980s. Economist longer-run growth forecasts for Advanced Economies have declined since the late 1980s to a very similar degree, halving from 3.0% to 1.6% per annum:

Population growth peaked several decades ago, and will continue to fall

Working age population has been falling in Japan since the mid 1990s, Germany in the late 1990s, European Union since about 2005 and across the OECD since about 2008. Britain, China and Italy have seen several years of declines in working age population (usually defined as 15-64 years old), and South Korea faces a very sharp decline over coming decades, due to their poor demographics. United Nations projections show world working age population growth of about 0.9% this year, falling to about 0.3% in 2050.

There has been a striking change in recent years with declining working age population that has spread from Japan/Italy to China/Germany/Netherlands/Denmark/Canada and many other countries. The demographic headwinds have been visible across Europe, the OECD and for the whole world during the last five years:

Slower employment growth is a key factor behind GDP growth deceleration in both the United States and Europe, in recent decades. Slowing population growth and ageing have lowered working-age population growth rates in most of the Advanced Economies. Greater participation by women and then by older workers has helped to offset this trend, but not to reverse it. The population in the Advanced Economies is expected to continue ageing, which will further lower potential employment growth due to older workers leaving the labour force as they retire...

Average hours worked have declined the most in the Euro Area and Japan, where the increase in participation by women/older groups has been the largest (these groups tend to work part-time instead of full-time):

Productivity growth has plummeted, with few signs of recovery

Improvements in productivity have declined very markedly, since the 1960s in Europe and the United States, since the 1980s in Japan. There has been more than an 80% fall in productivity growth from peak until present, from about 3.2% per annum to about 0.6% per annum:

Despite various technological innovations and advances, productivity growth has stagnated or declined the world over. Trend growth in Total Factor Productivity (TFP) increased noticeably in the United States in the late 1990s and early 2000s, alongside the large-scale uptake of information and communication technology. But it then plummeted during the GFC.

Gordon (2012) argues that most transformative technologies have already been invented and adopted, with other authors pointing to government policies that have discouraged innovation. Some researchers point to structural factors, such as policy and non-policy barriers to innovation and diffusion of technology, as possible reasons for stagnant productivity in the Advanced Economies. Slower accumulation of human and knowledge-based capital is another factor, as well as the slackening pace of labor and product market reforms relative to changing technology.

According to the OECD this productivity slowdown "has occurred at a time of rapid technological change, increasing participation of firms and countries in global value chains (GVCs), and rising education levels in the labour force, all of which are generally associated with higher productivity growth.”

Labour productivity in Australia has been steadily falling since the 1970s, despite a consistent decline in corporate tax rates.

Higher debt and lower investment

Failing to learn the lessons of the Global Financial Crisis, world debt has grown to a record level that now exceeds 300% of GDP. Household consumers, companies and governments have all been loading up the credit card as the evidence of Climate Change and resource depletion became obvious. Future generations will criticise the timing of this retail therapy, and they will bemoan the infatuation with house prices/asset inflation instead of getting on with the transition to a more sustainable economy...

Lower trend growth of capital stock has weighed on potential growth in the major Advanced Economies since the 1980s, including Japan/US/Europe. Much of the decline in investment has come from public and residential investment rather than business investment, according to Refinitiv data for these three large economies.

"Firstly, lower growth in the labour force requires less growth in the capital needed to sufficiently equip the workers. Secondly, the slower growth in the population reduces the need to invest in new dwellings and public infrastructure. Some of the reduction in residential investment, as a share of GDP, is related to the global financial crisis, and has been most apparent in the United States and parts of the euro area where residential investment was at elevated levels in the mid 2000s. The decline in public investment may also reflect more conservative management of public finances following the accumulation of government debt in recent decades." according to Ivailo Arsov and Benjamin Watson.

Recession has been imminent, regardless of coronavirus (many people acknowledged that we were late cycle)...

World growth has been slowing for over two years, and there were plenty of pockets of excess/debt/overheating that had built-up by last year. It wasn't just cyclical weakness in the economy that was the problem, but structural issues too. Key among these challenges is a dearth of productivity growth, and slowing employment growth. 

As the COVID-19 outbreak spreads across the globe, economic activity is tumbling in response to extensive official and unofficial containment measures. The result is an economic crisis alongside the health crisis. The COVID-19 shock is unique among natural-based events in the magnitude of its disruptive power and its global reach. It has unleashed a global recession. Such synchronized downturns traditionally generate damage that's slow to heal, with past production losses rarely made up in full.

For all the stimulus (fiscal/monetary/regulatory flexibility/etc) there are still tens of millions of people and businesses that are taking a massive economic hit right now. The expected relaxation in extreme containment measures, combined with building policy supports are expected to produce a dramatic 2H20 snap back as activity begins to "normalise". A number of factors—lingering caution, a significant wave of layoffs, and business closures—should continue to weigh on demand and maintain tighter financial conditions. As with typical recessions, lost output and incomes are unlikely to be made up in full (which will dampen core inflation).

As in previous recessions, we're unlikely to see a rebound to the prior level of economic activity for at least a couple of years following the COVID-19 recession (the GFC took much longer, with the 2008-9 recession being particularly unique in that it produced a very large contraction as well as an extremely sluggish recovery - with GDP remaining below potential for nearly nine years). And it's likely to take much longer than that for travel, tourism, hospitality, retail, shopping centres, trade and conferences to rebound (since these have been central to the mobility restrictions and social distancing measures). There will be some permanent behaviour shifts, similar to the shifts following the GFC where US households were more prudent about mortgage/credit card debt (and house price growth was moderate in that country).

Despite the current fiscal stimulus being twice the size of the discretionary stimulus passed during the Global Financial Crisis, there is virtually no 'traditional' stimulus (infrastructure/public investment, tax cuts). Instead, job retention schemes dominate (26% of all stimulus) and at least in Europe appear to be working so far...

Stimulus is adding to the debt burden, which was already overwhelming...

This fiscal stimulus is blowing out deficits (most notably in the United States where UBS now think the government deficit will exceed 20% of GDP, taking US Public Sector Debt up to 112% of GDP)... Across all governments UBS see fiscal deficits ballooning from 3% in 2019 to a whooping 11% during 2020, and remaining at 8% next year.

Governments have been trying to project the message that they will bail-out everybody with stimulus packages (which isn't true, since there are many people and businesses who are suffering at the moment). But there are negative and perverse consequences of massive stimulus - taxpayers and the community end up paying more tax, and feel the impact of reduced services in the future. It has always been utopian to believe that there will be no more recessions, or that counter-cyclical policy can perfectly cushion a downturn.

Some governments are already heavily indebted (such as Japan projected to hit 260% Public Debt/GDP, Italy 150%, Greece 165%, France 110%, Spain 110% and Singapore 122%) while others will see significant increases in their debt load (such as the United States, Australia, UK and Canada) due to the huge stimulus that's being spent during the covid-19 lockdown. Once lockdown ends, many countries will have to go through a long deleveraging cycle, which likely means lower inflation and growth, and higher taxes/lower spending at some point... The need for post-recession fiscal repair, and the rise in unemployment during the downturn that weighs on wage growth for a while, suggest that inflationary pressures will be subdued for years to come. Core inflation will probably trend in the 1-2% range at best for most major economies, much like in recent years, although the clear risk is that inflation heads lower than this and towards zero.

A possible second virus wave would need much more of the fiscal stimulus again. And monetary easing would be much bigger than the current crisis as well.

Conclusion: growth in GDP/income/profit will continue to decline... so let's learn to live with it, and focus on quality of life

Growth in GDP/income/profit has been falling for several decades, and growth rates will continue to fall in coming decades. Population growth will continue to decline into the middle of this century, with the working-age population already falling in Japan/Europe/China. Productivity growth has massively fallen in recent decades, from 3.2% per annum to 0.6% per annum in Developed Countries. Companies, governments and households are reluctant to invest, because their finances are stretched and because they can’t see the growth to pay for it. Global debt is at a record high… We have to accept a lower growth world, since fiscal policy and monetary policy wont fix it. Instead of anchoring at the historic rates of 1-2% real GDP for Advanced Economies, we need to consider a future of 0-1% growth per annum (and World GDP growth falling from 3% towards 1-2% in coming decades). Now is the time to turn from a blinkered GDP growth mindset towards wellbeing and quality of life.