Global economy will take a massive hit, S&P tells

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In this file photo taken on 9 March, 2020 Meric Greenbaum, Designated Market Maker IMC financial looks up at the board before the opening bell right before trading halted on the New York Stock Exchange on in New York.

The global economy is going to take a “massive hit” as lockdown measures are rolled out across much of the world, according to the rating agency S&P. Economists are revising their forecasts for world GDP on a near-daily basis, S&P adds, and identifies key concerns.

The US economy is set to decline by at least 12% in the second quarter– double the figure S&P pencilled in last week. It also expects a Q1 contraction now as well.

A similar decline in European GDP in the first half of the year but with a larger decline in the first quarter than the second because the shock started earlier there.

In contrast, China’s economy seems to be stabilising based on anecdotal evidence such as traffic patterns and shipping data. S&P estimates China’s GDP contracted 13% (annualized) in the first quarter but should begin to grow again in the second quarter.

Emerging markets such as Brazil, India, and Mexico are expected to suffer a similar shock to US and Europe, with possible double-digit percent GDP declines in the second quarter.

The S&P comments come after a huge rally on US stock markets on Tuesday thanks to the promise of trillions of dollars in stimulus for the economy. Shares in Asia Pacific have taken up the baton on Wednesday. The Nikkei is up 5% in Tokyo while the ASX200 is up almost 4% in Sydney.

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