JPMorgan Chase estimated this Friday contractions in the US GDP. and the eurozone for the first and second quarters of the year, which could lead to a “new global recession” due to the coronavirus pandemic, although it does not consider that the criteria for it to be officially declared will be met.
The world’s largest bank, JPMorgan Chase, updated its economic forecasts taking into account the coronavirus outbreak and its impact on financial markets.
The banking institution indicated in a note collected by Business Insider that “the evolution of the news about the virus and the material contraction” of market conditions make it “reasonable to expect more downward revisions” in global GDP during the first half of the year. year.
They calculate that the US GDP it is possible to contract 2% in the first quarter and 3% in the second, while for the eurozone the contraction would be 1.8% and 3.3%, respectively.
JPMorgan economists mention the “sudden stop” in economic activity that quarantines and social distancing measures are creating around the world, and how financial conditions “are shrinking profoundly as the perception of credit quality “deteriorates in different assets.
“As we resign ourselves to the inevitability of a large and broad ‘shock’ to global growth, the key problem is whether we can avoid a long-lasting, traditional recession incident,” the economists quoted by the newspaper say, highlighting the Authorities’ response in the form of stimulus packages and monetary policies that support consumer demand.
For its part, the CNBC channel also refers to JPMorgan’s estimates but in a more optimistic tone, pointing out that this “new global recession” might not enter the technical criteria of the National Bureau of Economic Research (NBER) because it should last “more than a few months” and economists are forecasting a “mid-year growth pickup.”
“COVID-19 is expected to affect the economy in February, March and April, generating contractions in GDP in most countries for at least one of the two quarters it extends,” said the firm’s chief economist, Bruce Krasman, quoted by that means. “If our current forecast is met, it seems appropriate to characterize it as a new global recession,” he added.
“Our mid-year growth pickup forecast would not fit NBER’s criteria that recessions should last longer than just a few months,” he said.
He also noted that “the scope of social distancing is increasing at a dramatic rate. Italy is in total isolation and the US and other countries are suspending their flights from a wide range of nations.”