Economic outlook: GDP reduction ‘twice as severe as 2009’ – prolonged recession ‘best case scenario’

23 April 2020 (Last Updated April 23rd, 2020 12:20)

23 April

Fitch Ratings has increased its forecast for world GDP reduction in 2020 to 3.9%.

Chief economist for the company Brian Coulton said: “This is twice as large as the decline anticipated in our early April GEO update and would be twice as severe as the 2009 recession.

“Macro policy responses have been unprecedented in scale and scope and will serve to cushion the near-term shock. But with job losses occurring on an extreme scale and intense pressures on small and medium-sized businesses, the path back to normality after the health crisis subsides is likely to be slow.”

Accountancy giant Deloitte has mapped three possible economic recoveries ranging from mild to severe.

In the best case scenario its chief global economist Dr Ira Kalish said: “A prolonged recession with weak supply and demand combined with financial system shocks wreaks havoc on social and economic life, but not all countries suffer to the same degree.

“Those that faced the pandemic sooner and reacted more aggressively bounce back faster, while those slower or less consistent in their responses are hurt more deeply and for longer. Before long, virtual life is real life in many places.”

KPMG’s chief economist Yael Selfin has looked at the impact of COVID-19 on various regions of the UK.

It has London as the least affected with economic contraction of 7.3% in 2020 bouncing back to growth of 8% in 2021.

The UK’s car manufacturing centre, the West Midlands, is forecast to be hardest hit with contraction of 10.1% in 2020 and growth of 11.3% in 2021.

Selfin said: “In the short term, our analysis highlights how the government’s ambition to ‘level-up’ the UK will face a setback as a result of the pandemic. We expect that the gap between performance in London and the rest of the UK will widen this year.”