The Global Economy will Experience its Worst Decline Since the Great Depression of the 1930s
The United Nations Department of Economic and Social Affairs reported on May 13 that, due to the impact of the global pandemic of the coronavirus, the global economic forecast for 2020 will drop by 3.2%. But the impact of the epidemic is not limited to this year. Global economic output is expected to lose nearly US $ 8.5 trillion in the next two years, which will almost equal the growth achieved in the past four years. The global economy may experience the worst decline since the Great Depression of the 1930s.
In 2020, the GDP of developed economies is expected to decrease by 5.0% annually, and it is expected to grow moderately by 3.4% by 2021. In 2020, global trade is expected to shrink by nearly 15%, mainly due to the sharp reduction in demand and the impact of the global supply chain disruption caused by the epidemic. Due to the global pandemic of this epidemic, nearly 90% of the world’s economies have implemented a certain degree of blockade, which has caused interruptions in the supply chain and a decline in consumer demand. It has also led to a surge in the number of unemployed. The GDP of developing economies this year is estimated to decrease by 0.7% annually.
The epidemic is also estimated to cause 34.3 million people in extreme poverty, of which 56% of the increase in poverty is located in Africa. In the epidemic and the economic shock after the epidemic, it is expected that by 2030, the world’s extremely poor population will increase by 130 million people. The epidemic has a greater impact on low-paying and low-skilled jobs, which will also exacerbate the income gap between the country and the country. In order to buffer the economic impact of the epidemic, governments of various countries have launched large-scale fiscal stimulus measures, which are estimated to be about 10% of GDP, but the economic recovery is expected to be quite slow.
The chief economist of the United Nations, Elliott Harris, said that the pace and intensity of economic recovery in various countries depends not only on whether isolation and public health measures to prevent the spread of the epidemic are effective, but also on whether governments can guarantee employment and income, especially For vulnerable groups in society. The epidemic will continue to affect all aspects of the economy and society in the future, in particular, it may accelerate the digitization of the entire economy, and its net impact on employment and wages may be negative, which may exacerbate income inequality.
The latest report by Goldman Sachs said that after the first quarter GDP and the April employment report were released, the bank raised the peak unemployment rate from 15% to 25%, and expected the US quarterly GDP rate to increase significantly in the second quarter. It fell by 39%, and was originally estimated to have fallen by 34%. In April, consumer spending on services was also estimated to be 20% lower than before the outbreak, mainly due to the reduction in transportation, hotel and entertainment spending. The non-farm payrolls in the United States dropped by 20.5 million in April, and the unemployment rate climbed to a post-war high of 14.7%.
Goldman Sachs said that the US economy is coming out of the bottom of April and expects the pace of recovery to accelerate. The bank’s forecast for the third-quarter GDP growth rate in the third quarter was sharply raised from 19% to 29%. Compared with the same period last year, Goldman Sachs estimated that the US GDP will decrease by 12.6% in the second quarter, 7.3% in the third quarter, and 5.4% in the fourth quarter. The GDP estimate for the whole year of 2020 will be 6.5%.