In 2020, global economic growth may slow to 0.4%. This is stated in a study by the Institute of International Finance (IIF). Earlier, the organization’s specialists predicted an increase in global GDP by 1.6%.
The main reason for the deterioration of the forecast, experts called the large-scale spread of coronavirus. As a result of the pandemic, there is an outflow of capital from financial markets, and the volumes of trade, passenger transportation and industrial production are declining.
“The 2019-nCoV coronavirus epidemic hit China in the first quarter of 2020, but it became a much bigger shock for the rest of the world and threatens to fall upon it with all its might in the second quarter. At the same time, the consequences for the (global. - RT ) industry and services sector will be more widespread and delayed in time than in China, ”noted IIF economists.
According to recent estimates, the total number of infected in the world exceeded 245 thousand, of which more than 10 thousand died. According to experts at the UN Conference on Trade and Development (UNCTAD), due to the effects of coronavirus in 2020, the global economy could lose up to $ 2 trillion.
“The rapid spread of the disease makes it sharply limit business activity, which leads to falling prices in the financial markets. To this is added in many respects the artificially sharp reduction in the cost of oil, which in recent weeks has stimulated the sale of risky assets, ”said Mark Goichmann, an analyst with TeleTrade, RT.
Since the beginning of 2020, world oil prices have fallen by almost 60%. So, at the moment the cost of Brent crude fell below $ 25 per barrel - for the first time in 17 years.
In addition to the reduction in fuel demand due to coronavirus, the collapse of the OPEC + alliance was a cause for a shock situation in the oil market. At the beginning of March, the parties to the transaction were unable to agree on an additional reduction in oil production and decided to completely abandon all their previous obligations.
Raw material exporting countries have already announced plans to increase production and export of hydrocarbons. Thus, a sharp increase in supply in the market puts pressure on prices.
Risk group
According to IIF experts, measures to contain the epidemic risk provoking a recession in the largest economies in the world. So, in the I quarter of 2020, US GDP may decrease by 0.8% compared with the same period in 2019, and in the II quarter - fall immediately by 8.9%. In general, according to the results of the year, the recession of the American economy may amount to 0.4%.
Analysts predict a similar state of affairs in Japan and Europe. According to the IIF report, in 2020 the eurozone economy may contract by 2.8%, and Japanese GDP by 1.5%.
“The collapse of economic ties and demand in countries, both within countries and in the international arena, is hitting the states. The United States accounts for about 15.1% of global GDP, the eurozone accounts for about 11%, and Japan - about 4%. That is why the damage from the pandemic is so serious for these countries, ”said Mark Goichmann.
The experts of the international rating agency S&P Global Ratings (S&P) adhere to a similar assessment. According to the organization’s forecast, in 2020 the entire world economy may enter the recession phase. At the same time, the economic downturn may primarily affect the countries of the European Union.
“The virus continues to spread, and an increasing part of the population of the eurozone is in complete or partial isolation. To date, tourism and investment have been hit hardest. Now we expect the eurozone economy to contract by 0.5-1% this year, ”the agency’s study said.
After quarantine
It is curious that the Chinese economy may also slow down in 2020, but at the same time it will be able to avoid a recession, analysts say. The IIF forecast GDP growth in the Asian republic by 3.5%. According to RT, the head of the laboratory of the Institute of Applied Economic Research of the RANEPA, Alexander Abramov, in many respects the spread of the coronavirus has so far affected only the trade and industrial sector of the PRC, but has not yet managed to hit other areas of the economy.
“In order for China's GDP to fall dramatically, a collapse must occur in all areas of the economy. The PRC government can attract new investments and restore business activity if it convinces the whole world to complete the outbreak of coronavirus on its territory and manages to revive production facilities, ”the expert added.
- AFP
- © Andreras Solaro
In general, according to RT experts surveyed, in the most likely scenario, the COVID-19 pandemic will end by the second half of 2020. In this case, the global economic growth rate will return to their previous levels by the end of the third quarter. This point of view in an interview with RT was voiced by XCritical specialist Jan Art.
According to Alexander Abramov, after the end of the epidemic, the global economy can recover within a few months. This is evidenced by the experience of the previous economic downturn, the expert said.
“It is enough to recall the crisis of 2008, when already in February 2009, the shares of many companies began to show growth of more than 100%. To date, there is no systemic economic crisis in the world. Every state is in decline, but it’s not total, ”Abramov concluded.