Measures imposed to slow the spread of the coronavirus are pushing the world economy into a recession deeper and more painful than initially expected, even if a rebound is still on the cards for next year. A week before the International Monetary Fund updates its forecasts for the global economy that will take into account the initial damage incurred since the coronavirus emerged in China at the start of the year, the first sets of data are coming in.
France’s central bank estimated Wednesday that the country’s economy contracted by around six percent in the first three months of 2020, its worst quarterly performance since World War II. Meanwhile, the leading economic institutes in Germany expect Europe’s top economy to contract by nearly 10 percent in the second quarter. That would be twice as deep as the contraction Germany suffered in 2009 as the global financial crisis hit the continent, and it would constitute the country’s worst performance since the institutes began keeping records in 1970.
If the United States is somewhat behind Europe in terms of shutting down businesses to stem the spread of the coronavirus and first-quarter figures will not be impacted, the effect is likely to make itself felt in the second quarter. Both California, which has the world’s fifth-largest economy ahead of Britain and France, and the US financial capital New York City are both under confinement measures. Meanwhile, the World Trade Organization said Wednesday it expects world trade to tumble by between 13 and 32 percent this year.
Since then, most of Europe has followed Italy and Spain into lockdown, as has much of the United States, slamming the brakes on both production and consumption. The chief economist of the Organisation for Economic Co-operation and Development (OECD), Laurence Boone, told France Inter radio Wednesday that every month in lockdown would lead to 2.0-percent decline in annual gross domestic product. One of the big question marks is whether a vaccine can be developed and marketed quickly to avoid another wave of infections, and whether factories will be able to restart production quickly.
Source: DJ
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