Expectations and fears of a new crisis ... What does 2020 hide for the global economy?

The possibility of a global recession is high this year, so most senior managers of companies in the field of logistics services are preparing for that, and representatives of the Russian Ministry of Finance described the global economy as a pre-crisis situation, and the reason for concern is not only due to the Corona virus, but also to other factors.

In a report published by the Russian newspaper Nezavisimaya Gazeta, writer Anastasia Pashkatova confirmed that investors have warned of a global recession since last year, when there was a decline in short and long-term US bond yields.

According to last year's estimates, the recession will theoretically begin in March 2020, although some experts believe that this should be expected later in the year 2021.

The writer emphasized that most managers of logistics companies expect a recession in the global economy this year.

Expectations and fears
Such expectations are fueled by concerns about the uncertain prospects for global trade and tensions between the United States and China.

In particular, the possibility of a recession in the next 12 months was reported by 64% of industry representatives who participated in the Emerging Enterprise Index in Agility 2020 (Logistics Market Change Index).

And the author quoted Essa Al-Saleh, CEO of Agility Global Logistics, as saying that the recession fears should not be underestimated, especially in light of the tension around the consequences of the outbreak of the Corona virus.

Although the Corona virus is increasingly contained in economists' alarming forecasts, it is not the main cause of concern at all.

Sergey Storchak, the Russian deputy finance minister, said the global economy is in a pre-crisis state.

Last year, many investors and economists warned of the risk of a global recession, and in March 2019 the yield on three-month US government bonds matched the ten-year-old rate.

Last August, investors were concerned about the noticeable reversal in the reflection of the yield curve on US government bonds.

In this regard, many Russian and foreign experts have presented this as the most reliable leading indicator confirming the possibility of an impending recession.

Time assumptions
The author noted that the time lag between this reversal - of the US bond yield curve - and the start of the recession could be from six months to a year.

According to some experts, there are many assumptions about the period in which a global recession can occur, and Artem Dave, head of the Amarkit Analysis Division, said, "The likelihood of a recession in 2020 is very high."

"We can say that the global economic crisis has already begun and the reason for its beginning is the Chinese Corona pandemic, whose consequences will be serious for the global economy," he added.

The most accurate indicator of the crisis today, is the Baltic Drew (the Baltic Stock Exchange trading index), which has been falling for six months, and has now fallen by 80%.

In real time, this indicator reflects the demand for raw materials worldwide by estimating the volume of cargo flows. It is noteworthy that, a few months before the announcement of the 2008 crisis, "Baltic Drew" collapsed by 90%.

Experts warn that the recession of 2020 is not just a crisis for several years, but will have serious consequences, as this is a global crisis for the entire economic system of capitalism, which has no place to expand nor a place to make a profit.

On this basis, the black line in the global economy may extend ten years or more, and financial recessions will accompany demographic, social and climate crises.

Causes of recession
Experts estimate the probability of a global recession or a recession in the US economy this year at between 10 and 20%, yet in the future, i.e. the year 2021, especially in its second half, this possibility may rise to between 60 and 70%, according to expert estimates.

The writer quoted Director of Financial Analysis Vadim Mirkulov as saying that the likelihood of a recession in 2020 is estimated at about 30%, according to his estimates, and he adds that if this happens during 2020, it is likely to happen just before the end of the year.

Unfortunately, because of this crisis, it is difficult to predict, but the main causes that we now notice are the Corona virus only if the epidemic spreads throughout the world, alongside the US presidential election, as well as the debt burden of non-financial organizations, according to Mirkulov.

According to the experts, the main pressure factors are changing the stage of the global business cycle, and political, economic and trade conflicts contribute in some way to global disintegration. Moreover, according to expert estimates, the period of stagnation in global economic activity may take from 12 to 18 months.

According to Russian expert Natalia Milchakova, many things related to the crisis will depend on the dynamics of oil prices.

The expert concludes, "For Russia, the crisis is not terrible until it leads to a drop in oil prices to less than forty dollars a barrel."

But if that happens, the state’s budget revenue will be reduced, and it will be very difficult to implement national projects, and the country may have to abandon some ambitious projects.