In a new report, S&P Global's economists are forecasting a global recession in 2020. They expect GDP growth this year to be 1.0%-1.5%, “with risks remaining firmly on the downside,”
In an article released March 17, entitled, COVID-19 Macroeconomic Update: The Global Recession Is Here And Now, the agency’s economists say that since their last update on March 3, “the spread of the coronavirus has accelerated, and its economic effect has worsened sharply. Economic data remains scarce, but the long-awaited initial figures from China for January and February were much worse than feared.”
Demand collapse
"The initial data from China suggests that its economy was hit far harder than projected, though a tentative stabilization has begun," said S&P Global's Chief Economist Paul Gruenwald. "Europe and the U.S. are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year."
S&P notes that central banks have taken action and are” undertaking some combination of sharply reduced policy rates, resumed assets purchase and liquidity injections. Fiscal authorities have generally lagged but have begun to loosen the purse strings; we suspect that larger and more targeted spending to the most affected groups is forthcoming.”
Eventual recovery
Gruenwald says China is a model for how the virus' spread could stabilize and society could begin to return to normal. “As China has shown, restrictions could be lifted more slowly than originally thought as public health concerns persist…It is difficult to measure how much output will be permanently lost as a result of COVID-19. While the focus now is rightly on containing the virus and measuring its downside effects, the strength of the eventual recovery will depend crucially on how much output can be replaced.”
