Deep global recession predicted by Fitch

Fitch now sees deep global recession in world economy

The global ratings agency Fitch has predicted a “deep global recession” in world economy in 2020. The Fitch sees coronavirus outbreak as the main reason for this global forecast. Nearly two weeks ago- Fitch as predicted a slow growth of 1.3% in world economy. But after the spread of COVID-19 pandemic in many European countries and America- Fitch revised its forecast.

Fitch- one of the three largest credit rating agencies in the world said it now expects world economic activity to decline by 1.9% this year. On March 22, Fitch had projected global GDP growth of 1.3%. In its updated research report it said that “a deep global recession in 2020 is now Fitch Ratings’ baseline forecast. In its latest Global Economic Outlook (GEO) forecasts-Fitch incorporates full-scale lockdowns across Europe, the U.S. and many other countries, something the forecast in March didn’t assume. 

“The forecast fall in global GDP for the year as a whole is on par with the global financial crisis, but the immediate hit to activity and jobs in the first half of this year will be worse,” said Brian Coulton, Fitch’s chief economist.

 In the U.S., Fitch said it expects the lockdowns to result in an “unprecedented peacetime” one-quarter GDP decline of 7% to 8% in the second quarter.  For the year, Fitch is projecting U.S. GDP to decline 3.3%. Last week, Fitch said if its baseline GDP forecast deteriorated further, U.S. GDP could fall by “almost” 1%, which means the effects of the coronavirus outbreak, is much worse than Fitch had imagined it could be at the time.

Fitch isn’t alone in predicting a deep recession, as Bank of America Global Research said it expects the COVID-19-related recession in the U.S. to be the “deepest recession on record” nearly five times worse than the postwar average.

Fitch also now expects Eurozone GDP to fall by 4.2% this year and the U.K.’s GDP to decline 3.9%, while China’s GDP is expected to grow by less than 2%. Last week, the expectation was for Europe’s GDP to fall “by more than 1.5%” and China’s GDP to slow to growth of “slightly higher” than 2%, if its baseline forecast deteriorated.

The lock down in Italy-Spain-China-Britain-France and USA has impacted the economic activity-production and trade. The lockdown in different countries has disrupted the global supply chains. Almost all the rating agencies and international financial institutions like IMF and World Bank has downgraded their forecast and predictions.

The pace of COVID-19 pandemic’s spread and global outbreak has surprised many experts.   

                                                                     A K Shah