Friday 7 August 2020

Global economy: A V-shaped recovery in 2021?

DUBAI, July 2, 2020

Global economy is expected to witness a 5.1% contraction in 2020 due to the rapid spread of Covid-19, followed by a robust 6.5% recovery in 2021, said Atradius, a world leader in credit insurance, surety and debt collection, in a new report.

The swift proliferation of the pandemic across the globe is taking a heavy economic toll on both advanced and emerging economies, Atradius added in its “Global Economic Outlook - June 2020”.

 Lockdowns reduce consumption opportunities and create supply-side shocks as a large number of businesses are not able to operate. The recession the global economy is facing in 2020, is deeper than what occurred during the 2008/2009 financial crisis. As such, the forecast of a robust V-shaped recovery in 2021 is surrounded by high level of uncertainty.

Key points from the report:

•    The recovery depends on the development and administration of a vaccine or, alternatively, a state of the world in which the effect of social distancing on economic activities is largely overcome.

•    Trade growth, already ailing before Covid-19, has nose-dived owing to the supply and demand side pressures created by the virus. In 2020, we expect global trade to shrink by about 15%.

•    All advanced markets are affected to a greater or lesser degree by the Covid-19 pandemic. As a group, advanced economies face a 6.5% GDP contraction in 2020, with a 5.9% recovery anticipated in 2021.

•    In the Eurozone, the worst of the pandemic seems to be over, but the region is still heading for a historic recession in 2020. Sizable fiscal packages have been deployed to soften the blow.

•    In the US, the negative effects of the trade war with China will be compounded by the negative effects the lockdown. The economic decline is having a huge impact on employment, with the unemployment rate shooting up to unprecedented levels.

•    Japan is heading for a strong contraction in 2020, with limited monetary policy space to combat the recession. Tourism revenues have plummeted.

•    The Covid-19 virus is affecting many emerging market economies. All major emerging economies – except for China – will face a recession in 2020. There are large differences between countries in regards to where they are on the infections curve, how effective policy measures are, and to the degree they are affected by lower commodity prices. – TradeArabia News Service


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