The Strategist

Economists: Forecasts are improving, but only China can evade economic downturn

08/27/2020 - 09:07

The economies of developed countries in quarterly terms in April-June dipped by 9.8%. This is almost four times more than at the peak of the financial crisis of 2008-2009, according to the OECD data. Nevertheless, experts are already improving their own forecasts for the growth of the world economy: for example, according to Moody’s, the decline will not exceed 5% in the G20 countries at the end of the year, as it was expected earlier. However, only China will be able to avoid a drop in GDP this year among other large economies.

George N
George N
GDP of OECD countries in the second quarter decreased by 9.8% compared to the first quarter, as follows from the preliminary assessment of the organization. For comparison, the decline was much less significant - by 2.3% - in the first quarter of 2009 at the peak of the global financial crisis. In January-March, the quarterly indicator has already decreased by 1.8%.

The strongest decline was recorded in the UK - by 20.4%; in France, where some of the most stringent quarantine measures were in force, GDP contracted by 13.8% (after the decline was 5.9% in January-March). In Italy, the decline was 5.4% in the first and 12.4% in the second quarter, in Germany - 2% and 9.7%, respectively. In the euro area and the EU as a whole, GDP decreased by 3.6% and 3.2% in January-March and by 12.1% and 11.7% in April-June. In the US, where the restrictions began to operate mainly from the end of March, GDP contracted by 9.5%, while in the first quarter - by 1.3%. In Canada, the indicator fell by 12% (minus 2.1% in January-March). In Japan, where restrictions were relatively mild, the decline was less pronounced - minus 7.8% (minus 0.6% in the first quarter).

In the G20 countries, the decline in the first quarter was more pronounced than in developed countries, and amounted to minus 3.5% (including due to a sharper decline in indicators in China).

In general, the G20 economy may shrink by 4.6% in 2020, and grow by 5.3% in 2021, nevertheless, in most countries, by the end of next year, GDP will not exceed the level of the end of 2019, follows from the updated the forecast of the rating agency Moody's. At the same time, compared to the end of April, when experts gave the most pessimistic estimates, the forecast was significantly improved (then a 5.8% decline was expected this year, an increase of 4.2% in 2021).

The GDP of the developed G20 countries will decrease by 6.5% (including the USA - by 5.7%, the Eurozone - by 9%, the UK - by 10.1%), developing countries - by 1.4%. The only economy that will show growth by the end of the year will be China (plus 1.9%), Moody’s expects. In Brazil, the decline will be 6.2%, in India - 3.1%, in Mexico - 10%, in Saudi Arabia - 4.5%, in Russia - 5.5%.