Deutsche Bank economists have predicted that there will be a severe global recession this year due to the coronavirus outbreak, leading to the biggest plunge in gross domestic product since the aftermath of World War II, Financial News reported on Wednesday.
Global markets have suffered record falls this week as alarm over the spread of coronavirus intensified. Fears of the impact of travel restrictions on the movement of people and goods have also hit global stocks and oil prices hard. Major stimulus plans also failed to quell worries about the economic impact of COVID-19, which has infected more than 2 lakh people worldwide and killed over 8,000 people.
In a 13-page report, the economists said that there will be a brief recession during the first half of 2020 and levels of global output “should be back close to normal by next year”.
“We now have early evidence of the negative economic impact on China and it has been far in excess of our initial projections,” the economists said. “This, among other factors, including more widespread and draconian containment measures to deal with the spread, the emergence of strain in credit markets and sharp tightening of financial conditions, have caused us to revise down substantially our global growth forecasts in the first half of the year.”
In China, where the outbreak originated late last year, the Deutsche Bank economists said the economy fell at about a 9% quarterly rate or 30% annual rate in the first quarter. They predicted 13% drop in the gross domestic product of the United States.
“We now expect the global economy will incur a severe but still relatively brief recession during the first half of 2020,” the German lender said. “All major regions of the globe could very well experience the sharpest quarterly declines in activity that have been recorded during the post-World War II era.”
The economists also stressed on the “degree of uncertainty” surrounding these projections. “These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast,” they added.