Will coronavirus cause a global recession?

FT News


Today I'm joined by our economics editor Chris Giles to look at the risk. The Corona virus epidemic poses to the global economy news stories about the spread of the virus. Often focus on the human cost quite rightly but also growing economic costumes disruption to trade supply chains tourism and transport. So what is the risk that this will push? The global economy into recession can the actions of central bankers and policymakers. Help avoid this Chris. Let's start with damage. What are the sectors of the global economy? That worst affected. And how big is the damage? So far you've mentioned the big ones tourism damaged very substantially in the areas where the outbreak is quite severe. So it's Li China parts of Asia. We're seeing huge pools in two stumbles. And that has a knock-on effect straight away to airlines in particular but other transport hotels leisure facilities all of the sorts of companies often small companies particularly when economic down to hotels restaurants and other leisure activities. So we're still in the part of this crisis where we don't really have any hard economic data but we can expect some very very large impacts which we expect to be temporary. We've got some surveys. The pair my from China was dreadful. Was the biggest drope. Even that the financial crisis in history in February Chinese costs without ninety percent that is not a normal number for any part of the economy. Because if you have a lock down. Lots of things simply won't happen. So those are the sectors. The ones that you've mentioned supply chain's first-quarter loss of this would come out into manufacturing. Why plants which shut down because essentially. I couldn't get parts of that is all happening. We don't know exactly how serious it is quite hard to pull this together. What we know that in China. It's very serious. You can see that from the pollution. Tater the upside is that. There's a lot less pollution but also means as a lot less activity going on and that is now spreading out around the world. Everyone thought it was going to be a reasonable sort of year in terms of economic growth the US China trade tensions calm down that when things pretty hunky Dory if unspectacular how vulnerable is the global economy because the epidemiologists are so uncertain about how far the viruses spread. The economists started off predicting very small total global economic impacts but those a growing pretty much by the day. We're now seeing pretty large effects. Go think the CDs is the best focused for the global economy. We we've had so far. They say that if it stays pretty limited said limited as to China and parts of Southeast Asia then the knock on effect on the global economy would be to take off half percent in twenty twenty percentage point off growth so to put four not two point nine percent but if it spreads much further than the two point nine could easily Hav and go to one point five or so. That's where we roughly on that is a reasonable for cost range at but as easy to get if this spreads much further there we're GonNa hit contraction touch the grabble economy and I think one thing you need to remember is one hundred percent we even to put. Four percents of the global economy does really put us in the zone. Way You talk about global recession because eight eight in the ten percent smallest levels of growth in any sort of reasonable historical period. And so if it's in that sort of button tenth of echo performance than we are talking really about to grab her recession and two point. Five percent of growth is whether the IMF likes to talk about recession. Does this crisis hit a weak spot? How damaging do you think it will be in terms of corporate debt levels and government at levels? Is it catching a time when the world is really quite indebted yes? I don't think this is one of the worries. The second round affects the if we have a short at shop down then we get over the corona virus problem and things get back to normal within. Yes you could knock activity off twenty twenty growth and is not the end of the world and it doesn't have lasting knock on effects. This is your classic v-shape recession shop down by shop up once the crisis posts. Not that much Tom Dunn. Everyone's lost a bit of money. But you can make a bit up where that gets more worrying than spreads into something more insidious in more longer lasting such stock companies that we find lots of worries in the global economy if he'd have to reach him in the IMF global financial reports tonight concerns about the levels of corporate debts in the world. More than than others venture. I read quite a lot of the cage since the financial crisis a decade ago companies have looted themselves up with the more that though Poke its vulnerability and those pockets is on the busy if that hit by a short cashback program that content short cashman from something. Massively more serious. So this is why. We're seeing lots of central banks policymakers old trying to make sure that banks full close that there's full balance of that that we don't have this little second round where a short term problem terms into something more serious but I think we're saying with things likeness small case globally but in the UK. On Thursday we see Flyby a small regional carrier which was in trouble anyway. Will that's going on because it's the straw that broke the camel's back and I think you'll see that with other companies as we move into this crisis particularly begins to lost a long time that companies web banks will pretty worried about finances anyway while this poopie the loss tool.

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