Coronavirus will lead to worldwide recession this year, warns S&P
S&P said the global annual gross domestic product (GDP) for 2020 would rise a mere 1 to 1.5percent on the sudden halt in economic activity caused by coronavirus containment measures.
S&P chief economist Paul Gruenwald said the initial data from China suggested that its economy was hit far harder than projected, although tentative stabilisation had begun.
“Europe and the US are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year,” Gruenwald said.
The spread of the virus, which the World Health Organisation declared a pandemic last week, has sent markets reeling as risk-aversion rises.
In its report, S&P said that the sudden stop to the global economy caused by the virus and the drastic efforts to contain it would lead to global recession.
“As the coronavirus pandemic escalates and growth heads sharply lower against a backdrop of volatile markets and growing credit stress, we now forecast a global recession this year, with 2020 GDP rising just 1 to 1.5percent,” S&P said. “The risks remain firmly on the downside.”
Moody’s last month cut its growth forecasts for South Africa to 0.7percent, citing domestic challenges rather than external factors.
Moody’s is expected to announce its decision on South Africa’s sovereign credit status this month. It said the country's gross national debt was projected to rise to R3.56trillion, or 65.6percent of GDP, by the end of this financial year, with a consolidated budget deficit of R370.5bn, or 6.8 percent of GDP.
Gruenwald said that emerging markets with high capital flows and commodity dependency, such as Indonesia, Mexico and South Africa, were particularly at risk.