In focus

Economic and Strategy Viewpoint - March 2020

  • The coronavirus casts a dark shadow over the world economy by threatening to derail the revival in growth which began in the latter part of 2019. Economic indicators up to January continued to show a steady improvement in activity with business surveys signalling rising output and orders. However, confidence in the sustainability of the upswing has been undermined by the spread of the virus which has hit China hard and now threatens the rest of Asia and Europe.
  • In response we are downgrading our global growth forecast for 2020 from 2.6% to 2.3%. The impact is concentrated in the first half of the year as the fall in demand and disruption to supply chains takes its toll on activity. Italy and Japan are likely to be in recession whilst output in the US, which is also affected by the problems at Boeing, is expected to have stalled in the first quarter.
  • Thereafter, assuming the virus is brought under control, activity is expected to gradually improve in the second quarter and rebound more vigorously as firms start to catch up with the backlog of orders. The bounce-back will be supported by easier policy as central banks in the US, China and the eurozone cut rates and we see more use of fiscal policy in China.
  • The considerable uncertainty around the virus means that we have introduced a new scenario – coronavirus pandemic – to capture a worst case where the virus spreads around the world causing a major dislocation in economic activity. The result would be a significantly weaker outcome for global activity compared to our base case.
  • As a result, the balance of risks around our baseline, where the upswing is delayed by the virus rather than being derailed, has swung back toward deflation.

The full Viewpoint is available below.



Read the full report

Economic and Strategy Viewpoint - March 2020 15 pages | 722 kb