With the increasing spread of the coronavirus pandemic the consequences for the global economy and some countries may turn out to be even more severe than the most recent pessimistic forecasts released.
In a forecast released by the United Nations organisation (UN) in mid-January 2020, the outlook was discouraging. The world GDP growth forecast was just 2.3% in 2019 according to the report and that was a minimum for a decade. The basic scenario for 2020 suggested that global economy growth may accelerate to 2.5% if trade tensions were resolved and the world could escape geopolitical distress. In the worst-case, growth could deteriorate this year to 1.8%. The US economy was expected by the UN to grow by 1.7% in the worst-case scenario, and the European Union’s GPD was expected to increase by just 1.6% (1.4% in 2019).
The Standard & Poor’s rating agency released in mid-March forecast of “global economic depression” in 2020 with 1-1.5% overall economic global growth. Two weeks passed and the time for new apocalyptic forecasts has come. No growth is expected at all. Financial institutions’ forecast now slid sharply to the negative zone. The Fitch rating agency says the quarantine will have a severe impact on business activity and the economy itself. The longer the quarantine lasts the more adverse effect the world GDP will have. Global GDP, in a basic scenario, is expected to plummet by 1.9% in 2020, the US economy may contract by 3.3% and the European economy may fall by 4.2%.
But these shocking figures are fading as the Bank of America has suggested a nightmare global recession of 2.7%, The US may see economy contraction of six % and the European Union – 7.6% in 2020. Eastern European countries may face the worst recession with GDP to plummet from five to six %.
The revision of forecasts is reminiscent of the “Big Short” movie scenario which is ironically devoted to the Global Financial Crisis of 2008-2009. However, the comparison is also fading away while the record contraction that the world has faced this century is just 2.3%. Now we can only imagine what forecasts may be released by end of April when the world is likely to face the peak of the pandemic.
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