The world economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries. With two-thirds of the world's population living in developing countries facing unprecedented economic damage from the coronavirus crisis, the UN is calling for a USD 2.5 trillion rescue package for these nations.
The global economy could shrink by up to 1 per cent in 2020 due to the coronavirus pandemic, a reversal from the previous forecast of 2.5 per cent growth.
The analysis by the UN Department of Economic and Social Affairs (DESA) said the COVID-19 pandemic is disrupting global supply chains and international trade. With nearly 100 countries closing national borders during the past month, the movement of people and tourism flows have come to a screeching halt.
The DESA also pointed out that millions of workers in these countries are facing the bleak prospect of losing their jobs. Governments are considering and rolling out large stimulus packages to avert a sharp downturn of their economies which could potentially plunge the global economy into a deep recession. In the worst-case scenario, the world economy could contract by 0.9 per cent in 2020
Impact in USA:
U.S. manufacturing PMI fell to 48.5 in March, down from 50.7 in February, due to growing number of businesses closing down beacuse of COVID19 outbreak according to IHS Markit's surveyAs per recent Morgan Stanley report, the United States economy will shrink 5.5% in 2020, the steepest drop since 1946, with a huge 38% contraction predicted for the second quarter, due to the economic damage from the coronavirus outbreak.
U.S. unemployment will also peak at a record 15.7% in the second quarter - that is up from a previous 12.8% forecast by the bank's economists - with cumulative job losses of 21 million in the second quarter, Morgan Stanley said.
The U.S. bank said it had cut its first-quarter forecast to an annualised 3.4% contraction from a previous 2.4%, while in the second quarter the economy is predicted to shrink 38%, up from an earlier forecast of a 30% contraction.
Projections released by the U.S. Congressional Budget Office showed U.S. gross domestic product will decline by more than 7% in the second quarter as the health crisis intensifies.
Impact In Europe:
The worst hit countries in Europe are Italy, Spain and Germany, which is seen as the growth driver of the region. Now, economists in those countries are all predicting sharp downturns in economic growth.
For the eurozone as a whole the PMI index of services & manufacturing dropped to a reading of 29.7 in March from 51.6 in February due to decline in business activities of majority companies
Service sector activity crashed across Europe in March as coronavirus lockdowns caused a series of widely watched business surveys to record their largest-ever monthly falls to levels that suggest a severe economic contraction is under way.
In Italy, Economy Minister Roberto Gualtieri said a forecast for the Italian economy to contract 6% in 2020 was probable. He also said in an interview that “Unfortunately the estimates are realistic at the same time we can aim for a vigorous recovery,”
Likewise, Germany’s council of economic advisors warned Tuesday that the euro zone’s largest economy could shrink 5.4% in 2020. The panel said its baseline scenario — in which the economic situation would normalize over the summer — was for the economy to contract by 2.8% this year before potentially growing by 3.7% next year, Reuters reported.
Impact On Indian Economy:
The growth of India’s gross domestic product (GDP) has declined largely due to low growth in manufacturing and construction.
The National Statistics Office has forecast India’s GDP growth to slip to an 11-year low of 5% in FY20. Manufacturing growth in 2019-20 is seen at 2% year on year, which is a 15-year low, as against 6.9% growth in FY19. Construction growth is seen slipping to a six-year low of 3.2% in FY20 from 8.7% in the last fiscal.
To help India in effectively tackling COVID-19 pandemic situation & strengthen India's public health preparedness, the World Bank’s Board of Executive Directors has approved a fast-track $1 billion, which is the largest ever health sector support from the bank to India.
The objective of the financial aid is to support all states and Union Territories across India and address the needs of infected people, at-risk populations, medical and emergency personnel and service providers, medical and testing facilities, and national and animal health agencies.