Surveys by OECD, ADB and IIF have shown that global GDP will slump far more deeply in 2020

21 Sep, 2020 20:12
source: Singularity Financial

Singularity Financial Hong Kong September 21, 2020 – Surveys by the Organization for Economic Cooperation and Development, Asian Development Bank (ADB) and Institute of International Finance (IIF) have shown that global GDP will slump far more deeply in 2020 than it did after the global financial crisis of 2009. Growth should return next year but the global economy will still not recover to 2019 levels.

According to a report from South China Morning Post, alone among the G20’s advanced and emerging economies, China should grow by nearly 2 per cent this year, as noted by OECD chief economist Laurence Boone, while elsewhere – from Britain to Mexico and beyond – horror stories abound of 10 per cent or greater projected contractions.

This might suggest that China is poised to emerge again, as it did a decade or so ago, as a dynamo to drive the rest of the global economy through huge infrastructure and other investments. This time, however, China is unlikely to act as saviour of the world, or at least the global economy.

China’s huge infrastructure stimulus in 2009 boosted commodity prices and thus global growth, and the likely absence of such stimulus now is a key factor in the reduced outlook for emerging markets, especially those in Southeast Asia and Latin America.
China, as the IIF notes, is “not repeating its very large infrastructure stimulus of 2009, which means that global activity and commodity prices aren’t getting the lift they did in the wake of the global financial crisis”. In addition, India is suffering a deep recession, unlike in 2009 when GDP growth was positive.

The sheer scale of the economic disruption and distress caused by the Covid-19 pandemic has, meanwhile, made it difficult to gauge exactly how much damage has been done and is still being done by the restructuring of China-linked supply chains and the tech wars launched by the Trump administration.

This could even earn the US president a reprieve from attacks on his disastrous economic policies as the presidential election draws nearer. The pandemic will become a useful smokescreen to shield him from the consequences of his actions.