Economists at the largest US bank, JPMorgan Chase, warned Thursday that according to their latest estimates on the COVID-19 pandemic, the world is entering a “global recession” that will be shorter and sharper than in the crisis. financial crisis in 2008, with the biggest economic blow expected in the first half of 2020 and a “significant” rebound in the second, although they do not rule out changes if there is a “second round” of infections.
In a webcast conference, the firm’s economist and chief executive Michael S. Hanson explained that there will be a “rather sharp contraction in global production, particularly in the first and second quarters, before a rebound occurs” in the second half of the year, which will be influenced by the “remarkable” monetary, fiscal and regulatory policies promoted by the authorities to support demand and “try to compensate for the nature of the economic shocks.”
“Assuming that we have entered a global recession perhaps in March or April, we expect to see two quarters of negative global growth with debt really concentrated in the first”, where the annualized economic “contraction” quarter by quarter would be 14%, Hansen said, “mainly due to the stoppage of production in China”, which was an unprecedented “blow” for the Asian giant.
The second quarter will be characterized by the “weakness” of developed markets due to the pathogen containment measures applied in Europe and the USA. from the middle of March and which can be extended until May, leaving, according to the experts’ calculations, an economic contraction of 6.7% globally, a “smaller” percentage compared to the first quarter that they attribute to the “sudden rebound” of the Chinese economy.
“These are numbers that make our eyes wide open and show how big the swings are, but we estimate a growth in Chinese GDP of 57% in the second quarter, which will offset the considerable double-digit drop, around 23%, of the markets developed, “remarked this economist, author of numerous global economic monitoring publications at JPMorgan along with chief researcher Bruce Kasman.
In the second half of the year, as a whole, analysts expect to see global economic growth of 13.3%, which would help offset the disastrous first half of the year and end 2020 with an economic contraction of 2.6% year-on-year, which would mean Still, “the worst year of global growth since the end of World War II.”
Hansen noted that the 2008 financial crisis “was a harder hit and lasted longer” globally, but the “intensity” of the recession caused by COVID-19 “is what really catches the eye”: “This it is a much shorter event in duration, but much more profound. ”
Economists reiterate that they foresee a “significant rebound in the second half of the year” and invite them to conceive of the coronavirus impact “as something halfway between a natural disaster, which would have a sharp and rapid impact on productive activity (… ) and standard recession dynamics. ”
In this sense, Hansen argued that there are differences between countries: while in China the crisis has been closer to natural disaster, with the slowdown in activity concentrated in the first quarter and an expected rebound in the second, the US . It shows a recessive dynamic, with a “more persistent ballast in activity and employment” that leads them to think that their recovery will be “slower”.
“This is a significant outbreak from an economic point of view, and one of the important questions is how long it will last. It is difficult to know for sure, but we think we are probably between 2 and 4 weeks from the peak (of infections) in Europe and the United States, depending in part on their containment measures, “said the expert.
However, Hansen underlined the “extreme uncertainty” of the situation and did not rule out that events force the figures to be revised: “” There is some concern about a second round of infections, we are at an early stage of the virus spreading to emerging markets and its implications can clearly pose a challenge to our estimates, “he added.