Coronavirus Hit World Economies 4 Times Harder In Q2 Than The Great Recession

The coronavirus pandemic has hit the world’s major economies four times harder than the financial crisis did a decade ago, the Organization for Economic Cooperation and Development said Monday.

OECD said gross domestic product in most Group of 20 nations, which account for 90% of the global economy, dropped a record 6.9%. That compares to a 1.6% drop in the first quarter of 2009 at the height of the Great Recession. China was the only G-20 nation to record growth in the second quarter, 11.5%, while all other G-20 countries recorded an average 11.8% contraction.

The pandemic ravaged China during the first quarter.

GDP fell most dramatically in India (25.2%), followed by the United Kingdom, Mexico, South Africa and France. U.S. GDP fell 9.1%.

On an annual basis, GDP for the G-20 was off 9.1% for the quarter following a 1.7% contraction the first quarter. China’s annual growth rate was pegged at 3.2%.

In its latest Global Economic Outlook, Fitch Ratings said world GDP fell 8.9% in the second quarter and projected global GDP would be 4.4% lower for the year, a modest improvement from its 4.6% projection in June.

"China has already regained its pre-virus level of GDP and retail sales in the U.S., France and the U.K. now exceed February levels, but we doubt this will become the much-lauded 'V'-shaped recovery. Unemployment shocks lie ahead in Europe, firms are cutting capex, and social distancing continues to directly constrain private-sector spending,” said Brian Coulton, Fitch’s chief economist.

He added: "We do not expect the pace of expansion in recent months to continue, as the boost from reopening fades, labor market dislocations constrain consumer spending, and firms retrench on capex [capital expenditures]. And with the virus outbreak not yet contained, social distancing behavior and ongoing restrictions will drag on activity."

Goldman Sachs is projecting a rosier third quarter than the Wall Street consensus, predicting U.S. GDP in the third quarter will grow 35%, up from 30% in its previous forecast, despite high unemployment and the threat coronavirus presents coupled with the coming flu season.

“Following the sharp rise in spending in late spring and early summer, the virus resurgence and the surprise fiscal tightening threatened a reversal. But spending instead rose strongly in July, and four high-frequency measures indicate a further 1-2% increase in real spending in August,” Goldman economists wrote.

Bank of America also increased its third quarter projection, forecasting a 27% increase in U.S. GDP, up from 15%, while a Bloomberg survey of economists predicted a 21% expansion. Morgan Stanley projected a 3.4% contraction for the full year, down from its earlier 5.3% prediction, largely banking on coronavirus stimulus.