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Our interim global forecast is the second prepared in March and
is much more pessimistic than our 17 March regularly scheduled
outlook. It is based on major downgrades to forecasts of the US
economy and oil prices. The risks remain overwhelmingly on the
downside and further downgrades are almost assured.
IHS Markit now believes the COVID-19 recession will be deeper
than the one following the global financial crisis in 2008-09. Real
world GDP should plunge 2.8% in 2020 compared with a drop of 1.7%
in 2009. Many key economies will see double-digit declines (at
annualized rates) in the second quarter, with the contraction
continuing into the third quarter.
Based on recent data and developments, IHS Markit has slashed
the US 2020 forecast to a contraction of
5.4%.
Because of the deep US recession and collapsing oil prices, IHS
Markit expects Canada's economy to contract 3.3%
this year, before seeing a modest recovery in 2021.
Europe, where the number of cases continues to
grow rapidly and lockdowns are pervasive, will see some of the
worst recessions in the developed world, with 2020 real GDP drops
of approximately 4.5% in the eurozone and
UK economies. Italy faces a
decline of 6% or more. The peak GDP contractions expected in the
second quarter of 2020 will far exceed those at the height of the
global financial crisis.
Japan was already in recession, before the
pandemic. The postponement of the summer Tokyo Olympics will make
the downturn even deeper. IHS Markit expects a real GDP contraction
of 2.5% this year and a very weak recovery next year.
China's economic activity is expected to have
plummeted at a near-double-digit rate in the first quarter. It will
then recover sooner than other countries, where the spread of the
virus has occurred later. IHS Markit predicts growth of just 2.0%
in 2020, followed by a stronger-than-average rebound in 2021,
because of its earlier recovery from the pandemic.
Emerging markets growth will also be hammered.
Not only are infection rates rising rapidly in key economies, such
as India, but the combination of the deepest global recession since
the 1930s, plunging commodity prices, and depreciating currencies
(compounding already dangerous debt burdens) will push many of
these economies to the breaking point.
It will likely take two to three years for most economies to
return to their pre-pandemic levels of output. 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 sizeable and aggressive policy response will help to limit the
downturn and bolster the upturn. 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.
