Key Forecast Trends

• As economic lockdowns spread across the world, the global economy faces a near-term hit which is likely to dwarf that seen during the global financial crisis (GFC).
• But this downturn is not the result of a systemic flaw or policy mistake. It’s a deliberate policy choice by governments to protect public health and save lives.
• Measures to contain the virus are therefore being accompanied by policies to protect vulnerable households and firms. This is happening at breakneck speed and in breathtaking magnitude.
• Crucially, central banks are supporting government action. First, with measures to plug liquidity gaps, then with asset-purchase programs to prevent bond yields rising as government spending increases on a scale normally reserved for wartime.
• None of this will prevent the global economy from taking a fearful near-term hit; nor is it meant to. But proactive fiscal support can help prevent this turning into a tsunami of unemployment and bankruptcy that would wreck any recovery hopes.
• Difficult days lie ahead. But the speed and magnitude of the policy response has been impressive, making us more optimistic that policymakers will be successful in laying the foundations for recovery—once the public-health crisis has passed.

Outlook

• We have lowered our 2020 global growth forecast to –0.7% from 2.2% last month, but we still see the risks to this forecast as heavily skewed to the downside.
• The US and euro-area economies are expected to contract by 1.5% and 3.5%, respectively, this year, while China is expected to expand by 3.0%. Compared with the beginning of the year, these forecasts are three to four percentage points lower.
• Our preliminary forecast for 2021 sees global growth rebounding to 3.3%. This rebound will depend crucially on the effectiveness of policies to dampen the economic impact of the lockdowns needed to contain the spread of the coronavirus. While the speed and extent of the policy response have been impressive, risks remain.
• Central banks have moved quickly to implement large-scale asset purchase programs in order to allow governments to support their economies without putting upward pressure on bond yields. We expect yields to remain close to, or below, current record lows.