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18 Mar, 2020 08:37

Recession is here! World economy facing great uncertainty ahead, S&P says

Recession is here! World economy facing great uncertainty ahead, S&P says

The novel coronavirus has severely disrupted global economic activity and the damage is about to get worse in the United States and Europe, according to international credit-rating agency S&P.

“The initial data from China suggests that its economy was hit far harder than projected, though a tentative stabilization has begun,” S&P Global chief economist Paul Gruenwald said.

“Europe and the United States are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year.”

According to the agency, the outbreak of the virus seems to have stabilized in much of Asia, but the data suggests that it has slowed economic activity far more than originally expected. 

“We now have China as a model for how the virus’ spread could stabilize and society could begin to return to normal,” Gruenwald said. 

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“As China has shown, restrictions could be lifted more slowly than originally thought as public health concerns persist.”

S&P raised concerns about great uncertainty that lays ahead, saying: “The increasing restrictions on person-to-person contact in Europe and the United States have sent markets reeling as risk-aversion rises and views on economic activity, earnings, and credit quality deteriorate sharply.”

Later in the day, S&P said in a second note that the US economy, the world’s largest, is either in the process of entering a recession, or that it has already entered one.

READ MORE: China getting back to business as worst of coronavirus outbreak in country appears to be over

The rating agency explained that the nation’s GDP is expected to fall by one percent in the first quarter, and by six percent in the second quarter. “Ironically, consumer spending, which was once the US economy’s savior... is now the culprit,” US chief economist at S&P Global Beth Ann Bovino said.

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