The promising signs of economic improvement much of the world was experiencing at the start of the year quickly dissipated when the COVID-19 pandemic swept across the globe.
According to Export Development Canada (EDC), there’s never been such a short, sharp drop in the world outlook as seen over the last few weeks.
“Initial indicators clearly show the COVID-19 lockdown is having a catastrophic effect on economic activity,” said Peter Hall, EDC’s vice-president and chief economist.
According to EDC’s Global Economic Outlook released today, global activity will fall by 2.8% this year, with developed markets being hardest hit and tumbling collectively by 4.2% in 2020. For example, the United States will fall 3.7%, while the United Kingdom and France will fall 6.5% and 5.7%, respectively.
Emerging markets look better on the surface thanks to higher potential growth. However, in a relative sense, the economic effects of the pandemic are equal to those in the industrialized world. Collectively, output will contract 1.9% this year, with China sustaining a 2.5% drop.
Canada will be harder hit than the rest of the Organisation of Economic Co-operation and Development (OECD), with the national economy shrinking by an outsized 9.4%. Numbers to date show a substantial drop in first-quarter output, with the worst to come in the April-June period. Unprecedented monetary and fiscal policy actions should hold things together until growth resumes, but weak commodity prices will keep Canada’s currency in the low US-70-cent range.
“Economic recovery will be directly related to the timing of return-to-work developments across the globe. When that happens, we can expect high positive numbers,” Hall said.
“While this is expected in the latter half of this year, we will have to wait until 2021, when world output rebounds, to the tune of an impressive 6.2%. Patience, persistence and collectively working together will provide Canada and the globe with ultimate economic victory,” Hall concluded.
