Coronavirus plunges world economy into brutal recession

Staggering 81% of the world's 3.3 billion-strong workforce has been affected by "the worst global crisis since the Second World War"

Measures imposed to slow the spread of the coronavirus are pushing the world economy into a recession deeper and more painful than initially expected, even if a rebound is still on the cards for next year. A week before the International Monetary Fund updates its forecasts for the global economy that will take into account the initial damage incurred since the coronavirus emerged in China at the start of the year, the first sets of data are coming in.

France's central bank estimated Wednesday that the country's economy contracted by around 6% in the first three months of 2020, its worst quarterly performance since World War II. Meanwhile, the leading economic institutes in Germany expect Europe's top economy to contract by nearly 10% in the second quarter.

That would be twice as deep as the contraction Germany suffered in 2009 as the global financial crisis hit the continent, and it would constitute the country's worst performance since the institutes began keeping records in 1970.

"During the first two quarters of the year, the economies of Western countries are collapsing," Philippe Waechter, economist at Ostrum Asset Management, told AFP.

If the United States is somewhat behind Europe in terms of shutting down businesses to stem the spread of the coronavirus and first-quarter figures will not be impacted, the effect is likely to make itself felt in the second quarter.

"It's impossible to imagine that the United States could escape the deep recession being suffered elsewhere," said Waechter.

Both California, which has the world's fifth-largest economy ahead of Britain and France, and the US financial capital New York City are both under confinement measures.

Meanwhile, the World Trade Organisation said Wednesday it expects world trade to tumble by between 13% and 32% this year, with  WTO chief Roberto Azevedo warning the world is facing the "deepest economic recession or downturn of our lives." Furthermore, data from UN's International Labour Organisation shows that staggering 81% of the world's 3.3 billion-strong workforce has been affected by "the worst global crisis since the Second World War".

Forecasts made just a few weeks ago have become outdated.

In mid-March, Moody's ratings agency said it expected moderate recessions of around two percent this year in the United States and 2.2% for the eurozone. Since then, most of Europe has followed Italy and Spain into lockdown, as has much of the United States, slamming the brakes on both production and consumption.

The chief economist of the Organisation for Economic Co-operation and Development (OECD), Laurence Boone, told France Inter radio Wednesday that every month in lockdown would lead to 2.0%-decline in annual gross domestic product.

"We have production levels dropping on the order of 25% to 30% across all of the countries" in the OECD club of industrialised nations, she said.

And with none of world's regions set to escape unscathed, the recession could well last longer than some have so far expected.

"In 2021, we can hope for growth similar to that of the past, but there is a fair amount of uncertainty," said Waechter.

One of the big question marks is whether a vaccine can be developed and marketed quickly to avoid another wave of infections, and whether factories will be able to restart production quickly.

"Considering how slow China's recovery is becoming, it is hard to argue that the US and European economies will recover quickly," said Edward Moya, analyst at online forex trading firm OANDA.

"If China is only halfway back up and running, patience will be needed to see how the rest of the world will turn out," he wrote in a note to investors.

The OECD's Boone said forecasting has become very difficult.

"We could partially exit the lockdown, but if the population has little immunity and the rest of the world is the same, we could face a new wave of virus infections and a new period of lockdowns," she said.

Yet, as the economic downturn starts to bite, health experts stressed that any premature loosening of restrictions could accelerate the spread of a disease that has already infiltrated almost every country and society, from refugees to royals.

In the US and Europe, which has born the brunt of the world's fatalities, heavy death tolls suggest the hardest-hit countries are far from mirroring Wuhan's turnaround. Italy, Spain and France are the worst-affected on the continent though the situation is also deteriorating in Britain, which saw a record 938 deaths Wednesday as its Prime Minister Boris Johnson spent a third day in intensive care.

The US, meanwhile, chalked up alarming new milestones as infections surged past 400,000 -- well ahead of any other country on the planet. New York, the centre of the US outbreak, saw a record 779 deaths in 24 hours though the state's Governor Andrew Cuomo said the epidemic appeared to be stabilising.

Thus, as some European countries weighed easing lockdown measures, the World Health Organisation urged against it.

"Now is not the time to relax measures. It is the time to once again double and triple our collective efforts to drive towards suppression with the whole support of society," said WHO's Europe director Hans Kluge.

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