Fitch: Coronavirus Shock Broadens

The economic fallout from the coronavirus crisis continues to broaden and deepen but Fitch Ratings’ forecasts are starting to show some signs of stabilisation.

Activity levels should start to rise in the months ahead, provided that a sharp resurgence in virus cases is avoided as lockdowns are relaxed. However, it will take a long time to return to normality: we are unlikely to reach pre-virus levels of GDP before mid-2022 in the US and significantly later in Europe. We have further lowered our global GDP forecast for 2020 to -4.6% from -3.9% in our late-April Global Economic Outlook (GEO) update. This reflects further cuts of more than 1pp to our eurozone and UK forecasts to around -8% and, most significantly, a 2.6pp cut to our forecast for emerging markets (EM) excluding China. The latter reflects the growing health crises in Brazil, Russia and India. However, our 2020 forecasts for the US, China, Japan, Korea, Australia and South Africa are unchanged since late-April, in contrast to repeated forecast downgrades in recent GEO updates. We have revised up our global growth forecast for 2021, but by only 0.1pp to 5.1%. This is despite the increased scope for a technical rebound from a deeper 2020 trough and the announcement of more policy easing since the previous GEO. The severity of the labour market shock in the US and elsewhere and ongoing social distancing will weigh heavily on the post-crisis recovery.