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As the COVID-19 crisis has intensified and countries have had to take stronger public health measures, even with an aggressive economic policy response from most countries, analysts at Wells Fargo expect global real GDP to contract by 2.7% in 2020, which would be the weakest performance since at least 1980.

Key Quotes: 

“As the COVID-19 virus has spread across the globe and governments have shut down large portions of their economies in an attempt to limit transmission, it has become clear global economic growth will experience a sharp, synchronized downturn during early 2020. The initial effects should be felt most keenly in China, where January-February retail sales slumped 20.5% year-over-over and industrial output fell 13.5%. Even with some improvement in March, Chinese GDP will undoubtedly suffer a large decline in Q1.”

“While initial effects were felt in China, the economic slowdown is likely to be widespread. Q1 GDP for Singapore–a bellwether for the global economy–contracted sharply, with weakness concentrated in the service sector. Meanwhile in the Eurozone, service sector PMIs have dropped to record lows, highlighting that the service sector will likely be even more affected by the COVID-19 crisis than manufacturing.”

“One current epicenter of the COVID-19 crisis is Europe, with most of the region’s large economies badly affected by the virus. Hard economic data are limited to date, with car registrations for the Eurozone’s four largest economies slumping roughly 60% year-over-year in March.”

“One theme that we expect to be closely watched in the weeks ahead is whether the Eurozone can provide a coordinated fiscal response across the region. Given the extent of the global economic shock, even with monetary and fiscal action, we still forecast a 2.7% global GDP contraction in 2020.”