Impact of coronavirus on economic growth

26 March 2020 | Markets and economy



Greg Davis: Well, it's great to have you with us today, Joe.  And for our clients, Joe is our global chief economist and you're seeing just a complete look at the world in terms of what the coronavirus is doing from an economic impact. We've seen states, cities being shut down virtually from an economic activity standpoint. I’d love to get your perspective of the impact that's going to have on economic growth and what that means. 

Joe Davis:  Thanks, Greg. I mean, it's profound. I mean, I've been watching the global economy for over 20 years and this is one of the biggest shocks to ever hit the global economy. I mean we've seen as, you know, and as investors know, the COVID-19 in one sense, positively the efforts to try to control the spread of the virus. But the very act of trying to do so is obviously really leading to shuttering of businesses and a significant now contraction in the global economy. It started in China and now we're witnessing significant disruptions in both Europe as well as the United States. 

The global economy is now entering recession, which means business activities contracting or falling and we anticipate further declines. They are going to be significant over the coming months. The severity of which really depends on two things. One would be how long the containment measures are necessary, right?  Which we don't exactly know. And then secondly will be the policymakers’ response, which has been positive I'd say to date.  And we would expect some more. But bottom line is, the U.S. economy has entered a recession. It will likely be in our judgment, one of the sharpest declines in our history, at least to records going back to World War II. I would also say one positive potentially is that it could also be among the shortest recessions because the nature of the recovery really hinges on our need for further containment measures. The less that the need for that, then that would allow businesses to reopen and we would see a resumption of some activity, which would be positive for growth. But you know increasingly the financial markets are anticipating the significant fall, and we do share that forecast, at least over the next several months.

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