The projections of the coronavirus damage to the global economy have moved rapidly from bad to worse.
Forecasting firm IHS Markit said the fallout is on track to be much more severe than the recession following the 2008 financial criss.
“Real world GDP should plunge 2.8 percent in 2020 compared with a drop of 1.7 percent in 2009,” said IHS’ Nariman Behravesh, chief economist, and Elisabeth Waelbroeck-Rocha, chief international economist, in an analysis. “Many key economies will see double-digit declines (at annualized rates) in the second quarter, with the contraction continuing into the third quarter.”
Just weeks ago, IHS predicted the global economy would manage to grow by 0.7 percent this year — indicating just how swiftly the outlook has changed as more businesses shutdown and workers go home as commerce grinds to a halt.
The U.S. economy — where stores from New York to Los Angeles are closed — is expected to shrink by 5.4 percent this year. The U.K. and eurozone is projected to contract by 4.5 percent overall. Japan was already in a recession before COVID-19 hit. And China’s economy, which was hit by the outbreak first, is seen as shifting down from near-double-digit growth to an expansion of just 2 percent.
“It will likely take two to three years for most economies to return to their pre-pandemic levels of output,” the economists said. “More troubling is the likelihood that, because of the negative effects of the uncertainty associated with the virus on capital spending, the path of potential GDP will be lower than before. This happened in the wake of the global financial crisis.
“A sizable and aggressive policy response will help to limit the downturn and bolster the upturn,” they said. “We are beginning to see a much more effective fiscal and monetary response in recent days. While these moves are probably not big enough, they will act as circuit breakers and prevent the COVID-19 recession from becoming far worse.”
President Donald Trump signed a $2 trillion stimulus package for the U.S. on Friday, but that is only seen as lasting so long in the face of such a steep increase in unemployment. Over 3 million people were added to unemployment rolls in just a week and more applications are sure to come in.
Macy’s Inc. on Monday said it would furlough most of its roughly 125,000 employees.
“Across Macy’s, Bloomingdale’s and Bluemercury brands, we will be moving to the absolute minimum workforce needed to maintain basic operations,” the department store said.
Retailers are essentially shifting into life-boat mode, cutting everything they can and trying to ride out the economic storm.
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