Now on its sixth full month, the global COVID-19 pandemic resurging in more countries has shattered hopes for any quick and lasting recovery from crippling economic slowdowns mangling economies worldwide.
A Reuters poll of over 500 economists from around the world taken from July 3 to 29 has again slashed its global growth forecast in light of the latest grim news from the pandemic front. Their new forecasts predict the worst contraction on record for the world economy.
The panel expected the global economy to shrink 4.0% this year, which equates to a massive loss of $3.4 trillion in growth. This estimate is worse than the -3.7% predicted in June. In turn, the June forecast was the sixth straight downgrade to forecasts starting with the 3.1% growth forecast made in January.
Now, the worst-case scenario for 2020 will see the global economy contract by a massive 6.5%. This estimate is far worse than the International Monetary Fund's projection of negative 4.9%. Worse, the odds national recoveries will stall and lead to negative growth is a real possibility, according to the Reuters poll.
It's now clear the world's future economic outlook depends almost entirely on the course the disease will take. A safe and effective vaccine is urgently needed to ignite any lasting economic recovery.
"We expect the economic reality of the virus to start catching up with businesses across the globe soon," said Jan Lambregts, global head financial markets research at Rabobank.
"What we need is a vaccine or significant breakthroughs in medicines to decisively reopen our economies and restore business and consumer confidence. But there is no magic wand for the time being."
"Over six months into the crisis, evidence is mounting that the global economy is likely to look lastingly different due to the pandemic," said Christian Keller, head of economics research at Barclays.
On the other hand, Reuters economists predict the global economy to grow 5.3% in 2021, slightly less than the 5.4% predicted in June but again dependent on the progress of a vaccine. IMF expects a 2.0% global growth in 2021, however.
The unprecedented 32.9% plunge in U.S. GDP for the second quarter has quelled any hopes the U.S. will join China in leading the world out of the current economic crisis.
The year-on-year plunge is the largest quarterly decline on record to hit the world's largest economy. In contrast, U.S. GDP in Q1 fell 5%.
Some economists pointed out the Great Depression of 1939 or any other economic slump over the past two centuries has ever been as bad as the second quarter 2020. The previous quarterly low was a 10% drop in the first quarter of 1958. The worst plunge in recorded history came in Q2 1921.