Economists from the leading trade credit insurer Atradius has published its global forecast for the year ahead which has unsurprisingly predictied that the global economy may be bracing for recession.
The Economic Outlook details the potential impact of the coronavirus pandemic and the forced government lockdowns on the global economic climate across the UK. The impact on economies globally is expected to result in the worst recession since 1980, with almost every country expected to experience some level of negative growth in 2020. As this recession reverberates through supply chains and forces business to close it is expected that global trade will shrink 15% this year.
Globally, Atradius forecasts a 5% contraction in GDP this year but on a more positive note they expect a recovery circa 6.5% in 2021. However, the pace of this recovery remains extremely uncertain and could change depending on second waves and how lockdown measures are lifted throughout the world. In the UK economy, GDP is expected to fall 14% in Q2 with a drop in consumer spending of almost 20%. Highlighting again the importance of helping local retailers and services to ensure they survive. In the second half of 2020, recovery is expected with a decline in GDP of 10.8% before a return to growth of 10.2% in 2021 again based on lockdown measures and second wave factors.
This baseline forecast is based on either a vaccine being developed or that economies globally learning to adapt to the new norm of social distancing in an economically viable way. Under these assumptions, Atradius anticipates a return to GDP growth in 2021, but with the growth coming at a slower pace than the rapid decline.
With high levels of uncertainty ahead, forecasts are at significant risk of changing quickly with the economic impact unfortunately becoming greater and leading to a far deeper global recession.
Stuart Ramsden, who suceeds Alun Sweeney as Regional Director for Atradius, UK & Ireland said:
“The rapid spread of Covid-19 across all markets is taking a heavy economic toll on both advanced and emerging economies. Lockdowns reduce consumption opportunities and create supply-side shocks as a large number of businesses are not able to operate. This has set the global economy on the path for a recession which is likely to be deeper than that of the 2008 financial crisis. During this unique period, detailed attention to credit management is essential to success.”