Despite
China’s making good efforts to keep the novel coronavirus outbreak under check
at home and get the economy back on its feet, economists have discarded
optimism that the world could avoid tumbling into recession for the first time
since the global financial crisis.
Global
rating agency Fitch said it expects economic activity worldwide to decline by
1.9 percent this year, with the United States, the eurozone and the United
Kingdom seeing their gross domestic product slip by 3.3 percent, 4.2 percent
and 3.9 percent, respectively, citing the “instantaneous and dramatic effects”
of the lockdown policies of various countries.
Fitch had predicted a weakening global GDP growth rate of 1.3 percent on March 19 — nearly half of its previous baseline forecast of 2.5 percent in December last year
“The
forecast for lower GDPs for the year, as a whole, is on a par with the global
financial crisis, but the immediate hit to activity and jobs in the first half
of this year will be worse” said Brian Coulton, Fitch’s chief economist.
The
projection came as the world’s tally of COVID-19 cases topped the 1-million
mark on Friday, with more than 54,000 fatalities.
Fitch had
predicted a weakening global GDP growth rate of 1.3 percent on March 19 —
nearly half of its previous baseline forecast of 2.5 percent in December last
year.
But, the
lockdown policies being implemented in many major economies to control the
spread of the virus have made the rating believe that the global economy may be
bracing for a harder hit than originally projected.
National
lockdowns, it pointed out, are set to reduce daily activity by roughly 20
percent from normal levels. This would ultimately translate into a 7 to 8 percent
drop in quarterly GDPs.
The most
noticeable impact of the lockdowns has been the “dramatic fallout in the labor
market”, particularly in the US and Canada, Fitch noted. It expects US
employment to peak at 10 percent in the second quarter of this year, with 10
million job losses.
Although
the pandemic has shown no sign of easing worldwide, China has taken the lead by
putting the world’s second-largest economy back on track.
“It
appears all the efforts have paid off,” said Aidan Yao, senior emerging Asia
economist at AXA Investment Managers.
The
return rate of Spring Festival travelers has climbed to 85 percent from 74
percent in the previous week, while total highway traffic has been above normal
levels for the second week running, up 18 percent year-on-year, according to
data from AXA.
“Economic
indicators have also continued to go back to previous norms”, with coal
consumption by major power companies rising to 95 percent of last year’s level
— from less than 80 percent in the prior week — and property transactions
bouncing to 96 percent of the 2019 level from 58 percent,” Yao said.
Official data shows that work resumption has reached 98 percent among large industrial firms, while the rate of small and medium-sized enterprises has risen to 72 percent, he added.
