According to the agency, hardly anybody could have expected such a scenario at the year beginning, when many economists predicted economic growth, and investor confidence was supported by the conclusion of a trade agreement between the United States and China.
Despite the large-scale stimulus measures taken in the context of the pandemic, the world is experiencing the largest economic crisis since the Great Depression. Though some operating activities and retail sales are improving, the hopes for a V-shaped recovery are fading.
Thomas Barkin, the CEO of the Federal Reserve Bank (FRB) of Richmond, compared the current trajectory along which the economy moves, with the descent on the elevator before going up on foot.
World Bank’s chief economist Carmen Reinhart noted that it was necessary to distinguish between rebound and economic recovery at the Bloomberg Invest Global conference in late June. “Real recovery means that you are as wealthy as you have been before the crisis, I believe that we are far from that,” she said.
A lot will depend on coronavirus spread and vaccine development, Bloomberg notes. New outbreaks often occur even in those countries where the epidemic has been brought under control.
According to the International Monetary Fund (IMF), by the end of the year income per capita is to decline in 170 countries (90% of the total). In January, IMF predicted that 160 countries would show growth in the economy and population incomes in January.
However, some investors and analysts continue to rely on a V-shaped recovery. Morgan Stanley economists stick to their forecast noting positive economic data in the US and Europe. Goldman Sachs analysts, in turn, worsened forecasts for the US economy this quarter, but expect improvement in September.
The MSCI All-Country World Index added about 40% to the level it fell to in March. However, its value has decreased by 6% since the year beginning.
Emerging markets will no longer be the engine of global economic growth this year. According to the World Bank forecast, their GDP will decrease by 2.5%, this is the worst indicator since the beginning of observations in 1960.
Even with an optimistic scenario the crisis consequences for the labor market will also be impossible to overcome in the second half of 2020, the International Labor Organization (ILO) predicts. It was reported that in the second quarter the number of hours worked was 14% lower than before the outbreak of coronavirus.
Along with that, Bloomberg notes that the possibility of state support, which has already reached $11 trillion, will be limited due to a record level of debt.
Meanwhile, central banks cut their interest rates to record low levels. Regulators also run various asset buyout programs. According to Morgan Stanley's forecast, the balance of central banks in the USA, EU, Japan and UK will increase by $13 trillion by the end of 2021.
Photos are from open sources.