Home Covid-19, Bloomberg: World GDP with zero growth according to the worst case scenario

Covid-19, Bloomberg: World GDP with zero growth according to the worst case scenario

Press Release: June 24, 2020

Covid19: impact on the world economy

There are numerous scenarios for the economy of the globe that arise every day, in a current context that still does not allow reliable forecasts. According to analysts, much will depend on what will happen in Southeast Asia. One of the latest Bloomberg Economics studies says that the negative effects on the world economy could exceed 3 trillion dollars. There are several indicators that foreshadow such a serious scenario. Most of all, the yield of 10-Year Treasuries, which in recent weeks has plummeted to below 0.40%: a record for US government bonds that are trading as if they were near maturity options. However, in addition to technical reasons that have recently affected the US debt market, there are no certainties in such a fluid context. Perhaps only one: the future of the global economy is closely linked to the Chinese one.

People's Republic of China, first to be hit by Covid-19, is also the country that first implemented measures for containment: however, these measures caused a real blockade of the production system, such as car sales collapsed by 80%. And China is an indispensable economic actor for the whole system. On the one hand, it represents a huge market for exports from other countries, on the other an essential source of supply. The future scenarios proposed by Bloomberg Economics are different. If the "factory of the world" manages to recover in the second quarter, this would have a relatively limited impact on the remaining economies. In the case of limited shock for the USA, India, UK, Canada, Brazil and a strong shock for Italy, France, Germany, South Korea and Japan, global GDP growth of only 1.2 percentage points can be estimated. If most countries were simultaneously facing a serious shock on the supply and demand side, then the growth for 2020 would be markedly negative, with a far worse scenario than that envisaged by the Bloomberg Economics analysis.

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