Although the consequences may be similar, there are significant

differences between the economic recession of 2008 and the crisis

that has abruptly erupted in 2020, primarily their origins: the Great
Recession of 2008 was systemic and first took hold in the financial
system; the Great Pandemic of 2020 is a cyclical crisis caused
because the economy was brought to a sudden standstill in
response to a health crisis. While there is a lot of uncertainty about
the outcome, experts say that the rate of recovery depends on the
speed with which containment measures are lifted.
“The 2008 and 2020 crises have totally different origins,” says Enrique Marazuela,
Director of Investments at BBVA Private Banking. “The former was a financial crisis;
unsustainable levels of debt had been taken on at a time when there was also a lack of
credit quality for many assets that were not totally familiar to many in the investing
public. This caused the financial system to collapse with the systemic consequences of
which we are all too aware.”

The crisis that started with Lehman Brothers’ bankruptcy sparked mistrust across the
entire financial system worldwide. According to Rafael Doménech, Head of Economic
Analysis at BBVA Research and Professor at the University of Valencia, the 2008
crisis was caused by a variety of imbalances that accumulated at the same time in a
number of economies, as a result of a real estate and financing bubble. At the same time
there was an increased level of business and household debt and excessive leveraging
of a considerable portion of the financial system. “When these imbalances could no
longer be sustained, the economy came to a sudden stop. This caused a lot of debt-
laden companies and financial institutions to go bankrupt, compounded by a lot of
households having payment issues,” he points out.
In contrast to the underlying financial cause of the 2008 recession, the current crisis is
rooted in a health crisis that, like a natural disaster might, has caused far-reaching,
unexpected economic repercussions. There is another difference with 2008, the origin of
this crisis is not nebulous, rather it is concrete: the international contagion of COVID-19.
In addition, for the time being, it is cyclical in nature, not systemic, and it is causing
damage to both supply and demand. Still, it has been more abrupt.