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FocusEconomics expects global recession over 40% in next 12 months due to COVID-19 - Daily News Egypt

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FocusEconomics expects global recession over 40% in next 12 months due to COVID-19

FocusEconomics panelists have markedly revised its Coronavirus estimate on its impact on global GDP growth as the virus continues to spread around the world.


The coronavirus has spurred fears of a global recession. Economic analysts put the probability of a global recession in the next 12 months at 43%, according to FocusEconomics’ Coronavirus Survey in March.

FocusEconomics said there is a huge divergence in analysts’ views, with a minimum forecast of 5% and a maximum forecast of 90%.

FocusEconomics panelists have markedly revised its Coronavirus estimate on its impact on global GDP growth as the virus continues to spread around the world.

In a poll of 54 analysts, over half of economists see a reduction in global growth this year of more than 0.5 percentage points, with 20% seeing a reduction of 1.0 percentage point or more. Meanwhile, in a previous survey in February, most panelists saw a 0.0–0.2 percentage-point reduction in global growth, with the impact likely concentrated during the first half (H1) of the current year.

In China, Iran, Italy, and South Korea, the countries currently with the largest outbreaks, panelists also see a large negative effect on the economy. Of the four, Iran is expected to be the hardest hit, due to its weaker health system and belated government response to the virus.

The vast majority of panelists do not see the economic impact of coronavirus persisting beyond 2020 by 64% of respondents compared to 36% believe that it will impact, the report highlighted.     

When asked, 64% of panelists don’t see COVID-19’s impact persisting beyond 2020, compared to the other 36% that believe it will continue into the next year, the report highlighted.

Julio Romero, chief economist at Corficolombiana said, “Coronavirus is unleashing a ”perfect storm”’ for the global economy. So far, the damage to tourism and supply chains is severe enough to warrant additional measures from economic authorities looking to avoid a contagion to the financial system.”

Romero added, “As Covid-19 is an evolving risk and we could see further impact on other important economies (like the US), the uncertainty will remain at least for the next six weeks; it is yet to be seen if countries are able to contain the outbreak like China did.”

“What stands between a short slowdown and a major slump is a credit/liquidity crunch. If companies in the real economy have the ability to borrow and extend their liabilities as they experience cash flow problems due to supply disruptions, we should cope with these painful couple of quarters relatively easily. However, if funding seizes up, a double hit could be deadly for many firms and we will see unemployment rise in many places,” said Vytenis Šimkus, senior economist at Swedbank.

Furthermore, Chief Economist at Investec Ltd Annabel Bishop noted that markets are likely to remain volatile, waiting for guidance from global monetary authorities, and also looking to the possibility of further fiscal stimulus to prop up global economic growth.

Meanwhile, Senior Advisor at LCA Consultores Luis Suzigan said, “Our baseline scenario was built on the assumption that a financial crisis and a global recession will be avoided. Recent developments regarding the epidemic in China, the epicentre of the outbreak, tend to reaffirm the assumption contemplated in our baseline scenario. The number of daily COVID-19 cases in China has been steadily decreasing, suggesting that the epidemic is being controlled. Should this Chinese pattern of spreading and overcoming the epidemic be replicated to other important economies, financial markets will soon stabilse, supply chains will be unblocked, and global demand will be gradually restored.”

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https://dailyfeed.dailynewsegypt.com/2020/03/17/focuseconomics-expects-global-recession-over-40-in-next-12-months-due-to-covid-19/
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