Coronavirus has 'triggered global recession', economists claim

17 March 2020, 14:15

Traders work during the opening bell at the New York Stock Exchange
Traders work during the opening bell at the New York Stock Exchange. Picture: Getty

By Matt Drake

The coronavirus outbreak has triggered a global recession, according to Goldman Sachs and Morgan Stanley economists.

Morgan Stanley has said a worldwide recession is now its "base case" with expected growth to fall to 0.9 per cent this year. Also, Goldman Sachs has predicted a weakening of growth to 1.25 per cent.

The predictions come after Covid-19 has spread to the US and Europe. They are based on new evidence that China, who was the first nation to be hit with the virus, experienced a faster collapse in its economy than originally thought, Bloomberg reports.

However, these predicted figures would not be as damaging as the 0.8 per cent contraction of 2009 as measured by the International Monetary Fund, but they would be worse than those of 2001 and the early 1990s.

Morgan Stanley’s economists said: "While the policy response will provide downside protection, the underlying damage from both Covid-19’s impact and tighter financial conditions will deliver a material shock to the global economy."

Read more: Coronavirus symptoms - What are they and what is the risk of Covid-19 in the UK?

Both Morgan Stanley and Goldman Sachs said they anticipate a rebound in the second half, but risks of deeper downturns will remain.

It comes factories, schools, pubs and restaurants are closing across the globe in a bid to contain the pandemic. Boris Johnson announced last night that people should avoid social interaction, but stopped short of ordering bars to close.

The FTSE 100 has dropped back into the red having initially recovered some of yesterday's pledge from G7 leaders to take whatever "necessary" measures to fight the coronavirus pandemic.