Here I am going to update my forecast of GDP for USA, Europe, Asia and the world as a result of the disruption caused by the coronavirus disease COVID-19.
I forecast US GDP will fall by more than 10% in 2020. Europe's GDP will fall by more than 12%, while Asia's GDP will fall by more than 10% in 2020. World's GDP is going to fall about 10% in 2020.
No, I do not think the recession will be a (very) short one. The recession will be very deep and will last around a year in its deepest phase. Afterwards growth will be slower, shallower recessions are possible. It will be an L-shaped economic recovery, and the recovery will be long, protracted and painful.
Why do I think that? The main reason is the extent of the coronavirus disease COVID-19 both supply and demand shock that is hitting the economy. This is unprecedented. Even during World Wars people could go out, when they were not being directly bombed. Even if one employee is affected surviving businesses for now like supermarkets, pharmacies, gas stations, banks and the working factories could be closed. Even Amazon, Zoom Video conferencing service could suffer, because someone has to support them.
What is more, many bubbles were formed due to the global central banks' easing policies which are now being pricked. Examples of bubbles are developed markets stocks, technology stocks especially, high yield bonds, real estate, government bonds etc. Usually when a vast and large financial bubble or collection of bubbles are pricked it takes a lot of time for the affected assets and ultimately the economy to recover.
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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
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Respectfully yours,
Petar Posledovich
1 comment:
Hello,
I fully agree. The only thing that works day and night and has increased, is the sound of the keybord of the central banks around the world adding numbers to balance off the gaps in the balance sheets of the corporate banks.
Regarding stock markets the question is not where the Dow Jones would go, but rather in what timeframe we are going to see one ounce of gold buyng the Dow (now we have about 16 gold ounces buyng the Dow).
It could happen at 3 tsd. USD or at 30 tsd. USD or at 300 tsd. USD. For the investor what matters is the buying power and asset allocation.
Regarding real economy - agree, the new normal will be a long and protracted L-shaped recovery, in which the rich will get richer and the poor will get poor, unless people do not understand the lesson of being less greedy and more charitable.
I hope we do not get a champagne socialism for the rich at the expense of the proles. Universal basic income and abolition of cash are things to come, together with social score and mandatory health checks.
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