The global economy enters a short, sharp, recession

In recent weeks we have revised down our baseline forecasts as more countries announced draconian policy measures to limit the spread of coronavirus. Our latest forecasts now show the global economy and many major economies entering a deep recession in the first half of 2020. Over the full year, we expect a rate of global growth of 0%, the second-weakest rate in almost 50 years.

The near-term outlook is extremely challenging. But we believe that, consistent with historical experience, the bounce back in activity will be very strong once social distancing measures are relaxed, and monetary and fiscal stimulus combine with a resumption in discretionary spending. Businesses that can weather the crisis should be prepared for a strong end to 2020 and start to 2021, with global growth rising as high as 5% in annual terms.

Still, as the rapid downgrades to our baseline demonstrate, we see huge uncertainty in this rapidly evolving environment. Therefore, we have updated our downside scenario to incorporate a worsening of the outbreak, the imposition of social restrictions, and financial stress. This scenario sees the global economy enter outright contraction in 2020, with GDP falling by 1.3%.

Topics: Global