We have downgraded our global GDP growth forecasts again, putting us firmly at the more pessimistic end of the forecast spectrum. Our expectation for a near 7% plunge in activity in H1 would result in global GDP falling by 2.8% for the whole of 2020, a much worse contraction than the 1.1% drop recorded in 2009.
We think that the risks around this forecast are balanced. The first key uncertainty is the size of the economic cost of lockdowns. Recent labour data point to significant costs. But as hard data for March begin to be published, we should start to get a more accurate picture of the hit from shutdowns.
The second uncertainty is the duration of lockdowns. On the face of it, the decisions by some European economies to start to relax restrictions support our view that months of stringent lockdowns are unlikely. But if new cases of COVID-19 in these economies re-accelerate it could increase the likelihood that other economies will withdraw restrictions more slowly.