Swiss Re Institute has said it is expecting to see a global recession in 2020 as the coronavirus outbreak continues to cause major disruption around the world, putting pressure on already weak economic resilience.
Analysts noted that the recession will likely be mild in a historical context, although economic growth will likely decelerate quite abruptly in Japan and the Eurozone, including in Italy, France and Germany.
“We expect a global recession with economic risks having intensified abruptly,” said Jérôme Haegeli, Group Chief Economist at Swiss Re.
“Fact is: the coronavirus is hitting the global economy when economic resilience is already weak to start with.”
The US and China are forecast to remain more resilient, although the risk of both a US recession and a China hard landing has risen to a very high 40%.
Swiss Re also foresees further monetary easing, but said that central bank action will need to be coordinated with forceful fiscal expansion to be effective.
It noted that few fiscal measures have been proposed thus far outside of Asia, with coordination among the G7 countries most likely if the situation deteriorates further.
In addition, global bond yields will remain even lower as US rates are quite likely to temporarily go below zero percent.
Given market dynamics, Swiss Re forecasts US 10- year yields to remain below 1% until end-2021, possibly going as low as zero or below temporarily, even without a technical recession domestically.
The coronavirus outbreak in the EU and US is still intensifying with the whole of Italy under quarantine, but analysts believe that the spread of the virus in China appears to have peaked, with early signs of normalising activity.
In China, Swiss Re has lowered GDP growth to 4.8% in 2020 and 5.5% in 2021, with a strong rebound in growth anticipated in the second quarter of the year.
In the Euro area, the reinsurer expects Italy to suffer the most, although even countries that are not yet directly affected by the virus outbreak will likely feel the impact via weaker export demand, supply chain disruptions and the financial market channel.
More than 120,000 cases of coronavirus have now been confirmed globally, and an estimated 4,382 people are thought to have died due to the outbreak.
The majority of cases and deaths continue to be recorded in China, but numbers in other countries are now accelerating, with South Korea, Iran and Italy all facing major outbreaks.
In the US, there have been 1,016 confirmed cases of coronavirus and 31 deaths at present count.