The world was headed into a ditch before the coronavirus, which is just the cherry on the sundae, to mix a metaphor. From Daniel Lacalle at mises.org:
In February, the general consensus between large investment banks and supranational entities was that there would be a one-time hit to GDP in the first quarter due to the impact of the coronavirus, followed by a stronger, V-shaped recovery. The IMF expected a modest correction of global GDP of 0.1 percent, and the largest cut on estimates for 2020 growth was 0.4 percent.
Those days are gone.
The latest round of global growth revisions includes a slash of growth estimates for the first and second quarters and a very modest recovery in the third and fourth. Average GDP estimates are now down 0.7 percent, and JP Morgan expects the eurozone to enter a deep recession in the next two quarters (–1.8 percent and –3.3 percent in the first and second quarters), followed by a very poor recovery that would still leave the full-year 2020 estimate in contraction. The investment bank also assumes US slumps of 2 percent and 3 percent, respectively, but a modest full-year growth. Capital Economics estimates a hit to the US economy for the full year that would cut 0.8 percent off previous estimates though still predicting growth, but a larger impact on the eurozone, with full-year 2020 growth at an avergae of –1.2 percent, led by a –2 percent prediction for Italy. This, unfortunately, looks like just the beginning of a downgrade cycle that adds to the issue of an economy that was already slowing in 2019.
