- An optimistic third-quarter bounce in global GDP will fizzle into slowed growth through the end of the year, Bloomberg Economics said Tuesday.
- Economists Tom Orlik and Björn van Roye revised their forecast for global growth in 2020 to -4.7% from -4%, calling for a “disastrous” slide driven by dislocated pandemic responses.
- Output won’t return to pre-virus highs until the second quarter of 2021 in the team’s base-case scenario.
- The dire projections are in some ways a “best case scenario,” the economists said, as they still hinges on “optimistic assumptions about the trajectory of the disease and the pace of recovery.”
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Global economic output will sharply improve in the third quarter as lockdowns are lifted before lasting coronavirus damage slows a full rebound, Bloomberg Economics said.
Economists Tom Orlik and Björn van Roye lowered their forecast for global gross domestic product growth to -4.7% from -4% on Tuesday, deeming the contraction a “disastrous” outcome. US GDP will shrink by 6.5%, more than twice the decline experienced during the financial crisis.
Worldwide output won’t return to pre-virus highs until the second quarter of 2021 as labour-market damage and virus fears slow activity, the team said.
Investor hopes for a V-shaped bounce to 2019 highs were all but dashed by a discordant response to the coronavirus pandemic, according to the firm’s latest projection. A swift recovery required quick-acting stimulus, virus containment in the second quarter, and synchronised lifting of lockdowns. Many major economies failed to meet the three conditions and set up the rest of the world for a prolonged recession, the team said.
Bloomberg Economics now expects a “stepped” recovery to replace the sought-after V-shaped trend. Activity will only rebound so much until a vaccine can alleviate consumer fears. Similarly, the labour market’s recovery will sit below a ceiling until post-virus overhauls create new jobs.
The updated forecast is in some ways “a best case scenario,” the economists said, as it still consists of “optimistic assumptions about the trajectory of the disease and the pace of recovery.”
The team’s more pessimistic case sees global GDP sliding 6.7% in 2020 with global output returning to pre-pandemic highs at the very end of 2021. While the current downturn isn’t the product of underlying faults, missteps in containing the outbreak could easily bring about an even worse outcome, the team cautioned.
“The history of forecast revisions in the age of COVID-19 shows even the bleakest forecasts sometimes aren’t bleak enough.”
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