US, Global Economies To Contract Because Of COVID-19 Effects

Mohamed El-Erian, the Allianz chief economic advisor and former Pimco chief executive, said in a televised report that the American economy could encounter a contraction of 10 percent or greater this year because of COVID-19, CNBC reported. “I think we may be at minus 10% to minus 14% growth for the U.S.,” the adviser said per the report.

The forecast was made in response to data from the outlet’s Rapid Update survey that encompasses multiple gross domestic product (GDP) forecasts. The estimates’ average last week displayed an approximately 4 percent drop in GDP this year.

El-Erian, for his part, said the particular nature of the economic impact arising out of a health emergency signifies that frameworks used in the past might not apply.

And Treasury Secretary Steven Mnuchin said in a televised appearance on Sunday that he believes that the American economy will return to its position prior to COVID-19 in “months,” Vox reported.

Mnuchin said, in part, “I think it will be months. I definitely don’t think it will be years, we are going to conquer this virus, we are going to have terrific breakthroughs.”

Mnuchin had been asked by Jake Tapper of CNN if he believed the economy would bounce back to pre-COVID levels in years or months.

In Spain, the country’s economy could contract in 2020 by over 12 percent in the most dire scenario projected by its central bank, Bloomberg reported. The central bank claims that the economy could be reduced by 6.8 percent to 12.4 percent in 2020.

The unemployment rate could reach up to 21.7 percent this year, which would take away increases following the 2008 worldwide recession and the European debt crisis that came after.

And the International Monetary Fund’s (IMF) mission chief for India said that the nation’s growth rate could rebound to more than 7 percent again next year in the event that the country can control COVID-19, CNBC reported. Infection rates in the country increased despite the fact that the government had people stay inside as of late March.

The IMF had forecast during its virtual spring meeting that India would expand 1.9 percent for the fiscal year concluding on March 31, 2021. That would make it one of the select major economies outside of China that are forecasted to have an expansion.

China, for its part, is encountering is worst three-month period in decades and will register its first-ever GDP loss of 6.8 percent in Q1 2020 compared to 2019. The country’s economy had grown 6 percent in Q4 2019.

Earlier this month, IMF cautioned that 2020’s “Great Lockdown” because of the coronavirus pandemic would bring about the worst global recession as of the Great Depression of 1929-33.

And Goldman Sachs had predicted that the economic fallout from the coronavirus pandemic would wind up four times worse than the 2008-09 recession; however, the recovery would be swift.

World Economic Forum (WEF) economists, for their part, are attracted to digital commerce as a foundation for post-coronavirus recovery.

According to a report on the COVID-19 crisis from the WEF, “Beyond new business models, the digital revolution has the potential to change traditional ways of conducting business.”