The world stares at the global recession amid increased coronavirus spread. Many of the world’s biggest economies are on the verge of sinking into recession.
Disruption in Economic Activities
The epidemic, throttling trade flows and disrupting China’s economy, can drag down the rest of the world with it. Affecting 79,251 in China and 85,082 people globally, COVID-19 is likely to cause a sharp downturn in the global economy. Hence, the IMF has reduced the growth forecast for China to 5.6%, lowest since 1990.
Germany and Japan
The world’s third-largest economy, Japan, has seen the biggest contraction since 2014. Its economy shrank 1.6% in Q4 of 2019 after sales tax hike and a powerful typhoon. Further, Germany’s Indicator of Economic Sentiment revealed that the economy could fall as its factories already struggled before the virus set in.
Hong Kong, Singapore, Indonesia and Malaysia
While Hong Kong has slipped into recession, Singapore is on the brink to suffer the same. Also, Indonesia’s GDP hit a three year low and Malaysia had hit the worst this year. Also, the virus has proliferated in South Korea, downgrading its economy. Coronavirus cases in South Korea surged to 3150 people out of which 16 people died. Further, IHS Markit revealed that the US service sector has hit 76 months low, the first time in four years.
CargoMetrics, a Boston based company, revealed a 27% decline in China’s imports since February 7. Further, it stated that dry bulk import including metals, ores, grains, wood, coal, and steel products are 40% down. Also, exports to the country are ugly too. From fashion to the pharmaceutical industry, every manufacturer fears a shortage of supply because of disruption in supply chains from China.
Further, China will not be able to buy commodities worth USD 200 billion over two years due to disturbance in shipping lines. However, the IMF forecasts global growth of 3.3% in 2020.
Prices of Crude Oil and Freight Rates
The epidemic has decreased prices of crude oil by 1.73% to USD 53.32 per barrel. Further, the share market of significant economies (the US and Japan) has seen a major decline in share prices. Moodys stated that the virus has spread to a high level in Italy as coronavirus affected 650 people out of which 17 people passed away.
In all, if the Chinese economy continues to shrink due to the virus, the day is not far when limping the world’s economy will fall into recession too.