- While Chinese activity picked up in late-Q1 as lockdown restrictions were unwound, we expect China’s GDP to have fallen 12% q/q in Q1 before rebounding sharply in Q2. But this Q2 boost from China looks set to be swamped by the collapse in activity caused by the rest of the world going into lockdown.
- Although shutdown restrictionselsewhere are less severe than those imposed in China, business survey and labour market data still point to sharp falls in activity in most countries in Q2. Quarterly GDP declines of 8% or more in the US and eurozone seem likely. Overall, world GDP could fall by about7% in H1, roughly double the size of the contraction in 2009 during the global financial crisis.
- In those economies subject to some form of lockdown, we expect restrictions to begin to be lifted during Q2. As a result, growth should resume in Q3 as sectors that have been forced to shut down see some pick-up. But despite this rebound, world GDP is now seen shrinking by 2.8% in 2020 overall. By comparison, in 2009, during the financial crisis, the fall in global GDP was 1.1 %.
- The pick-up in the second-half, followed by a return to more normal conditions next year, will result in world GDP growth rising to almost 6% in 2021, helped also by the recent collapse in oil prices to about $30pb. But the scale of the disruption means that we expect a permanent loss of output from the shock. We expect global GDP in the medium-term to be some 1.5% below the level we anticipated before the onset of the coronavirus outbreak.
- The risks around this forecast are largeand broadly balanced. But were stringent lockdowns or widespread disruption, perhaps due to renewed outbreaks of the virus, to extend into Q3, global GDP could fall by as much as 8% this year.
In as much as China's production and consumption breakdown in Q1 may reflect what will happen with our own economies here's what may be our future (click to enlarge).