Is the world spiralling down towards greatest recession on record ?

The sudden advent of coronavirus has brought the global economic activity to a halt, increasing the fears of Great Recession. The rising rate of unemployment and shrinking world production has alarmed other nations of the pandemic’s horrors, as a March quarter results came out. The dreaded Covid-19, which has locked down economies, sealed borders, banned exports, disrupted supply chains, shut businesses, stifled travel and knocked down stock market, is believed to be only beginning the havoc, while the worst is yet to come. Market analyst predict grimmer results for the next few months.

In March alone, the United States reported an unprecedented count of over 10 million who filed in for unemployment benefits. The true figure is expected to be much higher as it doesn’t include self-employed and gig workers. Many businesses have closed down, owing to the lack of clarity on future policies and nature of recovery. UK reported nearly a million new unemployment  benefit claims between March 16 and March 31. In France, about 20% of the corporate workforce is being sustained by a government-run partial unemployment scheme to control job losses. While in Spain, which was once an epicentre of the pandemic, nearly a million have lost jobs since it imposed a nationwide lockdown.

The highest unemployment rate has been recorded in Israel, where the rate has gone up from 4% (February) to 24.9 percent, after the government implement lockdown polices and promoted social distancing.

Due to increasing uncertainty in the economy, the economic forecasters are downgrading their predictions on frequent intervals, like Goldman Sachs which reduced its second quarter GDP forecast from –2% to –24% to –32%. Whereas Morgan Stanley’s expects that US gross domestic product in the second quarter will drop by 30.1%.

Bloomberg Economics predicted a global recession in the first half of 2020, mentioning that “for some important parts of the world the contraction has already begun.” It forecasted that the global economy would start spiralling downwards by 1.8% year-on-year in the first half of 2020. Kristalina Georgieva, managing director of the International Monetary Fund, says the world economy is already in a recession, with worse impact and losses as compared to 2009 downturn. The only silver lining to the dark clouds of recession looming over is the speed of the recovery. It is expected that global economy would recovery out of this Great Recession more swiftly than 2007-2009 crisis. On the positive side, central banks have already started taking precautionary steps including rate cuts and assets purchasing to ensure liquidity in the economy. Also, the housing sector, which triggered the last recession, is currently in a good shape. There is money flowing in the system, which makes speedy recovery a possibility. According to IMF, there is a good chance of global economy bouncing backing by next year.

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