Euler Hermes, a Paris-headquartered credit insurance giant, and Allianz, a Munich-based financial services behemoth, lowered the forecast of global GDP growth for the whole year to 0.8 percent as compared to the previously predicted 2.4 percent, the companies have stated. Global GDP growth in the second quarter of this year will reach the bottom of the economy – experts forecast a decline of 15 percent y/y.
“Since January, the economic effects of the Covid-19 coronavirus epidemic have developed in three phases – from a supply shock in the center of which was China, which caused seismic waves in world trade and disrupted the supply chain, it spread to financial markets when investors realized the inevitable recession and what followed was a sharp demand shock striking consumption and investment in China, Europe and the US,” states the joint press release.
Economists from Allianz and Euler Hermes expect a sharp global recession in the first half of 2020 in the overwhelming majority of developed and emerging economies, followed by a U-shaped recovery.
The cost of stopping the epidemic can account for up to 20-30 percent of the shock that each of the economies currently suffers on a monthly basis, they emphasized.
The Covid-19 outbreak that was first reported in November-December 2019 in China is causing a great stir in international trade. According to Allianz and Euler Hermes, every quarter of international trade disruptions will cost world trade $722 billion, mainly due to restrictions imposed at the borders of the European Union and the US.
Assuming that the measures to limit the spread of the disease will be successful, Allianz and Euler Hermes expect a revival of economic activity in the second half of 2020.
Getting out of the recession will continue to be a serious challenge for some companies, especially those over-indebted and with low equity because turnover losses during the crisis will be difficult to compensate by the end of the year. The number of corporate bankruptcies in the world will increase by 13 percent, estimate economists from the firms.