Most of the world's countries will see their economies either contract or stall within the next six months as the raging COVID-19 keeps employees away from the jobs and customers away from buying products and using services The as yet untamned COVID-19 pandemic will mean all advanced economies will suffer a recession this year, estimates Berenberg Bank, the Hamburg-based multinational full-service investment bank.
Berenberg analysts believe the pandemic will mean all advanced economies will enter a recession this year. The United States, which is now the world's most coronavirus infected country, will likely experience a huge 3% drop in year-on-year annual gross domestic product (GDP).
"At least for the months March to May, economic data will show a contraction not seen before in peacetime," said Berenberg in a research note to clients. "This year, all advanced economies will suffer a recession with year-on-year declines in annual GDP ranging from 3% in the U.S. to circa 7.5% in Italy."
The pandemic will also hurl most of the other remaining economies into a "deep freeze" for up to six months, which will likely mean a recession for these countries, expects the Economist Intelligence Unit (EIU).
"I think, right now, the key issue is to try and do something that's basically never been done before in the world," said Matthew Oxenford, lead U.K. analyst at the EIU to CNBC.
Oxenford said what needs to be done is to "put most economies on life support -- into some sort of deep freeze -- that they can come out of in three, probably more like six, months."
Predictions by both Berenberg and the EIU jibe with a host of others made by international banking institutions and business firms, including banks. Last week, the International Monetary Fund (IMF) declared the world will plunge into a recession this year due to the COVID-19 pandemic but said this one will be worse than the Great Recession of 2008. The IMF, however, predicted a quick recovery in 2021 providing COVID-19 can be quickly tamed. It said it's ready to deploy all of its $1 trillion in lending capacity to support global economies hit by the coronavirus.
IMF managing director Kristalina Georgieva admitted the outlook for global growth is negative. She said the IMF now expects "a recession at least as bad as during the global financial crisis or worse."
"The economic impact (from COVID-19) is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be," she said.
Georgieva said the IMF will massively boost emergency finance. She revealed 80 countries have already requested financial assistance.
Earlier this month, Georgieva warned 2020 world growth will come in below the 2.9% rate seen in 2019, but stopped short of predicting a recession. Trade wars launched by president Donald Trump as part of his mercantist and America first belief crashed global growth in 2019 to the lowest rate since a 0.7% contraction in 2009.
Georgieva said an economic recovery could be expected in 2021, but for this recovery to materialize, countries need to prioritize containing COVID-19 and strengthning their health systems.
