Stratfor (USA): it is the strongest global recession in 80 years. Where is the bottom?

The prospects for an early global economic recovery after the pandemic covid-19 is officially dead, and all the major international financial institutions and private analysts predict a huge loss and a long uneven output from the steepest recession in 80 years. It turned out that economic models failed to cope with the uncertainties and discontinuities of unprecedented global quarantine. But even though specific numbers vary, all the latest projections point in one direction — down.

– The international monetary Fund (IMF) expects that the aggregate economic losses from covid-19 in 2020-2021 years will amount to 12.5 trillion US dollars, and world production will fall this year by 4.9%, and next recover is 5.4%. In addition, the IMF believes that the strength of the recovery is “highly uncertain”, and the second wave of infections in 2021 may further reduce economic growth by 2.5%.

And this despite the fact that the forecast from the IMF is still optimistic: for example, the world Bank predicts in 2020 the global decline of 5.2%, and the Organization for economic cooperation and development — even greater reductions, by as much as 6%. Private forecasts in worst-case scenarios and does provide the global slowdown to 12%.

There remain considerable downside risks, especially given that the synchronous nature of the slowdown has touched 95% of the world economy, and no single country or group of countries, which could act as a locomotive to pull along the rest. The only major economy who still has a chance to slightly positive growth this year (about 1%) is China. But even for this slight increase should be able to fade the recent outbreak covid-19 in Beijing.

Even if the pandemic will be brought under control in the coming months, the global recovery will be slow and uneven, as countries emerge from quarantine at different speeds. Caution from consumers and companies will mean a hangover in the labour market, especially given the unprecedented speed of economic downturn and accompanying job losses. “Dismal science” Economics, in the words of Thomas Carlyle (Thomas Carlyle), I used to expect in a pandemic real wages are rising — because of mortality and changes in the ratio of capital and labor. But modern medicine traditional expectations negates: survival of more people, and that ratio is changing.

Shocked by households worried about income, and increase savings for a rainy day will keep global demand in the future. The reduction in business investment, but in the US they fell before the outbreak covid-19, — limit the demand even stronger. In addition, careful production costs and equipment will disrupt global supply chains, which will lead to performance degradation and future economic growth.

End of the epidemic covid-19 is not expected, and all the major international financial institutions and private analysts predict a huge cumulative losses and a long, uneven recovery.

Borrowing costs will probably remain low for an extended period — especially against the background of repression by the Central banks, intended to control the cost of servicing the growing public debt. On the other hand, the debt of households and businesses is continuing regardless of their income. This means that individuals and companies will have to control variable costs, to avoid bankruptcies, which are increasing in number due to the effects of the pandemic.

The depth and duration of the global recession not only depend on the spread of the epidemic and its location, but also from government stimulus to prevent a further drop in income. In emerging markets that are heavily dependent on foreign funding, such incentives are still lagging. The impression that financial markets are “disconnected” from the real economy, and the IMF has warned that excessive risk is fraught with a “sudden stop” of capital inflows to emerging markets if the mood will change again. Meanwhile the world trade organization predicts a contraction in global trade this year to 13-32% (this corresponds to the fall in world GDP by 2.5 to 8.8%) and most affected countries dependent on exports.