Advanced economies are expected to feel the brunt of the recession with a cumulative drop in GDP of 6.6%. The United Kingdom, already burdened by its exit from the European Union, is looking at a 10.8% decline, while the Eurozone is not expected to fair much better, showing a drop in GDP of 8.0%. The United States and Japan are forecast to experience slightly less steep declines of 6.1% and 6.0% respectively.
Growth in emerging markets will also drop sharply, and the rapid increase in the spread of the coronavirus in a number of the larger emerging economies recently, means that forecasts could worsen in the coming months. China may be the only major economy able to avoid recession this year, however with only meagre growth expected, it could join the rest of the world in negative growth. Russia, which was hit by COVID-19 while in the middle of a price war with Saudi Arabia, is being severely impacted by the low oil price, its primary source of income, and lockdowns driving down demand for oil. The combination has lowered its GDP growth forecast to -6.2%. Brazil has reacted to COVID-19 very late and is now experiencing the fastest increase in infections of any country worldwide; economically it is not expected to do any better as GDP is forecast to decline 7.5%. Mexico, is experiencing a significant drop in demand from its main export partners in the US and Canada.
The baseline forecast assumes that either a vaccine will be developed or that world economies will adapt to the new norm of social distancing in an economically viable way. Under these assumptions, a return to GDP growth in 2021 is anticipated, but with the growth coming at a slower pace than the decline did. However, if neither of these two assumptions take place, the outlook will become less positive.
Andreas Tesch, Chief Market Officer of Atradius commented, “The lockdowns across the world, while necessary, have had a huge impact on the global economy. However, when effective and successful they will enable us to return to growth faster. During this unique period, detailed attention to credit management is essential to success.”
Atradius is a global provider of credit insurance, surety and collections services, with a strategic presence in over 50 countries. The credit insurance, bond and collection products offered by Atradius protect companies around the world against the default risks associated with selling goods and services on credit. Atradius is a member of Grupo Catalana Occidente (GCO.MC), one of the largest insurers in Spain and one of the largest credit insurers in the world. You can find more information online at https://group.atradius.com