Governments have been taking unprecedented measures to contain the Coronavirus outbreak, which is threatening to spark a worldwide economic contraction.
Financial markets are facing their worst crisis since 1929, a veteran analyst told CNBC on Friday, as top economists downgraded their forecasts to point to an impending global recession.
Financial analyst Stephen Isaacs said the 1929 Great Depression was the closest bear market comparison. After the stock market crash of Oct. 29, 1929, the S&P 500 fell 86% in less than three years and did not regain its previous peak until 1954.
Goldman Sachs said it expects the global real gross domestic product to contract by about 1% in 2020, a sharper economic decline than in the year following the 2008 global financial crisis.
“The coronacrisis — or more precisely, the response to that crisis — represents a physical (as opposed to financial) constraint on economic activity that is unprecedented in postwar history,” the investment bank said in a note to its clients published late on Sunday.
It sees the real GDP in advanced economies contracting "very sharply" in the second quarter, including a 24% drop in the United States, a whopping two-and-a-half time as significant as the previous postwar record.
U.S. real GDP is now expected to fall by 0.2%, the Euro Area by 1.5% and Japan by 0.8%, while China, where the virus originated, is projected to see a slowdown in growth between 3.9% and 6.1%.
The economists then expect a bounce-back of 12% in the third quarter and 10% in the fourth quarter. The unemployment is expected to surge to 9%. They also expect GDP to contract by 3.8% for the full year on an annual average basis.
China’s GDP is headed for a 9% drop in first-quarter year-over-year growth as the Coronavirus, which originated in Wuhan and spread across China before spreading around the globe, takes a toll on the country’s economy.
The report forecasts a 9% contraction, down from a prediction of 2.5% growth for China. Industrial output was down 13.5% in January and February, retail sales dropped 20.5%, and fixed-asset investment sank 24.5%. Over the past two months, China's manufacturing activity has fallen to a record low, according to data from the National Bureau of Statistics.
According to Statista Research Department in a forecast from March 2020, it is estimated that Italy's GDP will decrease due to the impact of Coronavirus (COVID-19). Precisely, it is forecasted that the Italian GDP would drop by 3% by the end of the first quarter of 2020. In the second quarter, this figure could decrease to 5%.
Moreover, it is forecasted that the sectors of textile, train and air transport, hotels, restaurants, shows, and sporting events will record the most significant drops. On the other hand, some industries could benefit from the spread of Coronavirus in terms of GDP growth. For instance, the gross domestic product could increase up to 6% in the following sectors: food, health, chemicals for house care and personal care, large-scale food distribution, publishing activities, communication, and IT services.
Sources: reuters.com, cnbc.com, nationalreview.com, statista.com
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