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S&P Forecasts Steeper downturn in the U.S. and Europe

The two economic areas constitute the two main drivers of the high downturn. Both of them, along, with most of the rest of the world, have enforced strict lockdown measures. These have landed the global economy into a recession. The report adds:

“The economic damage associated with the outbreak is nonlinear. This means that if containment takes twice as long as expected, the economic damage will be more than twice as bad.”

As a result of the nonlinear outbreak, the economy will take longer to recover. It will potentially grow with a bit more volatility even after recovery.

Currently, the U.S., Italy, and Spain combined have recorded a higher number of confirmed cases compared to China as the epicentre of the outbreak, recently termed more dangerous than SARS.

“Italy and Spain now account for more than half of the global death toll. The virus appears to be more contagious than Severe Acute Respiratory Syndrome (SARS) in 2003, although less lethal.”

Various analysts in economic news predict the European market will suffer further economic damage as a result of the recent and ongoing total lockdown of the U.K., to slow down the rate of household-to-household infection cases. Prime Minister Boris Johnson stated:

“If too many people become seriously unwell at one time, the NHS will be unable to handle it – meaning more people are likely to die, not just from Coronavirus but from other illnesses as well.”

The U.S. Economy Will Contract By 12% in the Second Quarter

Approximately 3.2 million Americans lost their jobs by the third week of March due to the effects of Coronavirus.

“Labor market outcomes are deteriorating sharply, and the unemployment rate will likely top 10% in the second quarter (with a monthly peak above 13% in May).”

S&P’s forecast estimates that the U.S. will contract by 2% compared to Europe’s 1.3%. This is mostly based on the S&P 500 index, which has also fallen by 30% in and highest Volatility Index-record, since 2008. Gruenwald added:

“Growth will likely rebound to 3.2% in 2021, implying a loss of GDP of $360 billion relative to our December 2019 baseline”.

Meanwhile, China’s economy, as the second-largest in the world, has fallen to its lowest of 6.1% in 30 years. It had a 14% drop in industrial production and 21% in retail sales. However, it is forecasted to grow at 3% this year.

The S&P pessimistic forecast adds to the growing list of global concerns as a result of the Coronavirus after the recent report by the Food and Agriculture of the United Nations.

The report warned that the world might have to contend with a global food crisis in April and May. The world must implement fast, drastic measures in food production, processing, and supply to avoid this.

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