The World Trade Organisation's (WTO) Director-General Roberto Azevedo said that recent projections show the economic downturn and job losses caused by the coronavirus pandemic would be worse than the 2008 recession. "This pandemic will inevitably have an enormous impact on the economy..." he said in a video message filmed from his home and posted on the WTO website.
The analogy of what is going on now and back in 2008 are forcing oneself in. With the completely different origins and circumstances of the two financial disasters, the economic symptoms are quite comparable. The major difference is that no one can assess the overall pandemic impact while it is far from being over or at least contained. The S&P 500 index could be taken as the most sensitive indicator for the financial market. It fell from 1440 points in May 2008 to the lows of 680 point in February 2009, slashing almost 53% off its value. The index dropped from 3400 points in February 2020 to 2170 points in March or by 36.2%. The other parameter is oil prices that is reflecting overall production demand and business activity. The lows of $36 per barrel of Brent crude benchmark in 2008 were well left behind in 2020 when prices crashed to $24.5 per barrel. There may be a high possibility of a further decline in Brent crude prices to even lower levels of $20 per barrel.
World GDP in 2009 shrank by 2.3% for the first time since World War II. International Monetary Fund (IMF) suggests that the recession in 2020 could be even worth than that figure. The world trade in 2009 contracted by 11.9%. The WTO is refraining from providing any particular estimation by just saying that the contraction would be sharp and significant.
The most affected countries from the coronavirus crisis, however, may be the most developed countries like the United States, the European Union and China. The reason for that is that those countries host most of the financial, trade and production capacities. The bigger the performance was prior the downturn, the bigger the fall may be. Those nations may paint such pictures if they are part of world economic relations, on a higher scale than any other state. The global nature of the unwinding crisis just contributes to their own economic troubles.
Goldman Sachs, JP Morgan, Morgan Stanley consider that the US GDP may drop by six % in 1Q 2020, and even more by unimaginable 24-30% in 2Q 2020. Unemployment, according to Treasury Secretary Steven Mnuchin, may exceed 20% or more than double the level of 2008. The recent data for Initial Jobless Claims in the US published on Thursday demonstrated a historic record of 3,283 million.
Imagine that these are only preliminary figures that are compared with the overall 2008 Global financial crisis impact. Given that fact it might be considered that the coronavirus recession could be much worse.
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