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‘The crisis is far from over.’ World economy faces an uphill climb

‘The crisis is far from over.’ World economy faces an uphill climb thumbnail

The world economy is entering the second half of 2020 still deeply weighed down by the COVID-19 pandemic, with a full recovery now ruled out for this year and even a 2021 comeback dependent on a lot going right.

It’s a scenario few if any predicted at the start of the year when most economists were banking on another year of expansion and a U.S.-China trade agreement was meant to give corporate and investor confidence a shot in the arm.

Instead, the pandemic forced swathes of the global population into what the International Monetary Fund dubs “The Great Lockdown.” Central banks and governments responded with trillions of dollars in unprecedented support to prevent markets from melting down and to keep furloughed workers and struggling companies afloat until the virus passed.​

​Even with those rescue efforts, the world is still suffering its worst economic crisis since the Great Depression. While some gauges of manufacturing and retail sales in major economies are showing improvement, hopes for a V-shaped rebound have been shattered as the reopening of businesses looks shaky at best and job losses risk turning from temporary to permanent.

It’s an economic trajectory Federal Reserve Bank of Richmond President Thomas Barkin has likened to riding the elevator down but needing to take the stairs back up.

“There is a real danger of confusing rebound with recovery,” Carmen Reinhart, the World Bank’s chief economist, said at the Bloomberg Invest Global conference on June 23. “True recovery means you are at least as well off as you were before the crisis started, and I think we are a long way off that.”

Uncertain times

Much depends on the spread of the coronavirus, a vaccine for which remains out of grasp. The World Health Organization warns that the worst of the pandemic is still to come as cases top 10 million and deaths have risen beyond 500,000. And even in countries where the virus appeared contained, fresh flare-ups are frequent.

The IMF estimates that by the end of this year 170 countries — or almost 90% of the world — will have lower per capita income. That’s a reversal from January, when it predicted 160 countries would end the year with bigger economies and positive per capita income growth.

It’s now likely that global gross domestic product by the end of 2021 will in many cases still be lower than where it was at the end of 2019, according to HSBC Holdings economists led by Janet Henry. Bloomberg Economics describes it as “Goodbye Victory V, Hello Worry W.”

Central bankers remain on the alert to do more. Federal Reserve Chairman Jerome H. Powell has warned that the outlook is “extraordinarily uncertain” and European Central Bank President Christine Lagarde has spoken of a “restrained” recovery that will change parts of the economy permanently.

To be sure, there are pockets of recovery that could gain traction. Morgan Stanley economists are sticking to forecasts of a V-shaped recovery, pointing to positive surprises in recent economic data, especially in the U.S. and euro region.

Global markets are split between investors betting on a V-shape recovery and those expecting significant dislocations. The MSCI All-Country World Index of global stocks has gained nearly 40% from a March low but is still down about 6% this year as investors bet policy stimulus around the world will cushion the economic impact from the pandemic. U.S. 10-year Treasury yields have tumbled by more than 100 basis points this year to around 0.67%.

Mixed performance

Lessons on how the recovery plays out are being drawn from Asia, where the virus has been brought under control but the rebound has been mixed.

In South Korea, which flattened its infection curve months ago, the emergence of new virus clusters is casting a chill on shoppers.

China’s manufacturing activity climbed in June, as did other manufacturing gauges across the region, yet new orders continue to show weakness.

That worrisome outlook means businesses are navigating in the dark, according to Joerg Wuttke, president of the EU Chamber of Commerce in China, who expects the uncertainty to last for another couple of years.

‘Chainsaw’ recovery

“The recovery is not V, it is not W, it is looking like the top of a chainsaw,” he said. “Up and down and up and down and painful all the way.”

It also means that fast-expanding emerging economies won’t be the global growth engine they have been, with the World Bank predicting this group of countries will shrink 2.5% — their worst performance in data that starts in 1960. Latin America is now on the front lines of the virus.

A complete rebound to pre-crisis levels looks impossible until the virus is controlled — an outlook that’s especially true for sectors such as tourism, transport and entertainment where restrictions are expected to linger.

The hit to labor markets has been worse than initially estimated and will be impossible to repair in the second half of 2020 even under the most optimistic scenario, according to the International Labour Organization. It last week estimated that working hours in the second quarter were 14% lower than before the virus, equivalent to a loss of 400 million full-time positions.

Although U.S. companies added 4.8 million people to payrolls in June, only three in 10 jobs lost have been recovered and initial applications for unemployment benefits remain elevated. More than 2.8 million Americans lost their jobs for good in June.

Debt worries

“While a near-term mechanical bounce in economic activity in response to the easing of lockdown measures looks likely, we expect the subsequent climb to be long and arduous,” said Joachim Fels, global economic advisor at Pacific Investment Management Co.

There are other challenges too.

Record levels of debt will restrain how much additional support governments can roll out — on top of the $11-trillion fiscal stimulus already in train.

Governments are grappling with how to extend or terminate costly near-term measures to fund wages and keep companies alive, while at the same time gearing up for longer-term stimulus to drive a recovery.

That borrowing won’t come without side effects, such as keeping zombie companies going, according to Alicia Garcia Herrero, chief Asia Pacific economist with Natixis.

“If there is no cleanup of debt, going back to pre-crisis levels will take even longer,” said Garcia Herrero.

Meanwhile, central banks have slashed interest rates to new lows, with some embracing negative borrowing costs. In a bid to cap market rates, multiple types of assets have been bought and policymakers continue to tweak their tool kit with hints of more innovation to come.

Morgan Stanley predicts $13 trillion in cumulative central bank balance-sheet expansion from the U.S., euro region, Japan and U.K. through the end of 2021.

Even with those steps, it’s too soon to conclude they will be enough, said Kazuo Momma, who used to be in charge of monetary policy at the Bank of Japan.

“The crisis is far from over,” he said.

LA Times



31 Comments on "‘The crisis is far from over.’ World economy faces an uphill climb"

  1. Sissyfuss on Mon, 6th Jul 2020 9:10 am 

    The pandemic is not a feature of Limits to Growth, it’s just the revealer. Conditions of change are upon us as BAU has exited the scene. The pursuit of survival has replaced that of happiness. The masses overwhelming the bars and beaches have yet to understand that.

  2. Richard Guenette on Wed, 8th Jul 2020 2:39 pm 

    Canada and Mexico should keep their borders closed-indefinitely. Anyone who is a carrier (not wearing a mask or practicing social distancing) should be denied entry into Canada or Mexico.

  3. Richard Guenette on Wed, 8th Jul 2020 2:42 pm 

    The pandemic is still here in the world- reinstate the lockdown (only if there is a second wave coming).

  4. Richard Guenette on Wed, 8th Jul 2020 2:51 pm 

    Canada and Mexico should keep their borders closed-indefinitely to each other but allow AmriKans free travel. Anyone who is a carrier (not wearing a mask or practicing social distancing) should be denied entry into the US from Kanada or Mexico.

  5. Richard Guenette on Wed, 8th Jul 2020 2:53 pm 

    The pandemic is joke for many but still here in the real world- reinstate the lockdown for some and allow others to do as they please (second wave is here).

  6. Richard Guenette on Wed, 8th Jul 2020 3:01 pm 

    Davy, being sick is nothing to joke about.

  7. FamousDrScanlon on Wed, 8th Jul 2020 3:06 pm 

    JuanP on Wed, 8th Jul 2020 3:01 pm

    “Davy, being sick is nothing to joke about.”

    Your projecting juanPee

  8. HelenMaise on Thu, 9th Jul 2020 8:25 am 

    4K New champ(뉴챔프)의 킬링벌스를 라이브로홀로코스트, 1Day 1Baby, 나의 부활절, Drift, Reality, Really 등

  9. NatalieTaura on Thu, 9th Jul 2020 3:28 pm 

    Exploring the IBM NetVista M41 Windows 98 PC

  10. Duncan Idaho on Thu, 9th Jul 2020 4:01 pm 

    “In part, that is because, along with everything else the pandemic has highlighted about this country — its racial inequities, its yawning class divides, its toxic partisanship, its hobbled state capacity — is that it is maddeningly ineducable.”

    Maybe they are just dumb?

  11. Rik on Thu, 9th Jul 2020 4:11 pm 

    American politicians really don’t understand what goes on in the real world.

  12. Cloggie on Fri, 10th Jul 2020 5:00 am 

    “3D-house printing could mean the end of the misery of all these shanty towns around the world. As a rule-of-thumb, a family can afford and finance a home that costs 3 times the yearly income. For $4000,- that means almost everybody on the planet. By the turn of the century, all people around the world living in a 3D-printed home, with a flat panel, space-based internet and solar panels on the roof, is a positive and realistic vision, something to work towards.”

    https://deepresource.wordpress.com/2020/07/10/3d-printed-houses-update/

  13. OliveNuask on Fri, 10th Jul 2020 11:38 am 

    TIGER KING CAKE NERDY NUMMIES

  14. zero juan on Fri, 10th Jul 2020 11:45 am 

    more juanPee bullshit:

    OliveNuask said TIGER KING CAKE – NERDY NUMMIES…

    Annunaki said Slave van Helsing, Annunaki was once travelling th…

    Annunaki said Slave van Helsing, true knowledge is not for slave…

  15. Annunaki on Fri, 10th Jul 2020 12:03 pm 

    Pink Pudel, we appreciate your attention but animals are not part of Annunaki domain. You are free to go, and free to leave this website, Pink Pudel.

  16. JuanP on Fri, 10th Jul 2020 12:17 pm 

    Forum please note this for the last time:

    We (juanPee, JuanP, supremist muzzie jerk, Richard Guenette, Boney Joe, Truth Buster, Gaia, Kenz300,DT, Rick, Socialrevolutioncoming.FamousDrScanlon….are spending less time on this lame unmoderated forum to concentrate on our chronic depression. We want to thank Davy for moderating us because we need it. We have saved the best of are comments for are new blog. We have years worth of sock material. We have enjoyed being moderating and neutering because our agendas. We will still be here it is just we will be spending more time putting laying in the fetal position in bed. We don’t expect much of help with depression. This is more a suicidal condition over the last 10 years of formulating are REAL Depressed. Many of my suicidal thoughts and filthy lifestyles our my egotistical way of life. We plagiarize and do ID theft daily ruining this forum. Anyone can kill themselves. Do it if it feels good I am thinking about it. For stalkers like me I hope I find more stalking opportunities. LOL. There will be a prize for anyone who can find where I live and rat me out. Double LOL. Anyway fuck are all of you I hate everyone including myself. I guess we could post more on the moderated section at PO dot com, but we knew we’d get are ass permanently banned for the socks and ID theft stupidity. We’ll try not to let the door smack us up the backside on the way out.

    Goodbye to ALL of you dumbasses.

  17. REAL Green on Fri, 10th Jul 2020 2:19 pm 

    Everyone no’s JuanP is us Davy. Were not foolin anybody. Were only makin ourselfs look even stupider.

  18. Richard Guenette on Fri, 10th Jul 2020 2:25 pm 

    Everyone no’s JuanP is us Dr. Were not foolin anybody. Were only makin ourselfs look even stupider.

  19. Annunaki on Fri, 10th Jul 2020 2:26 pm 

    He is ME-TOO

  20. zero juan on Fri, 10th Jul 2020 2:28 pm 

    JuanPee bullshit

    Annunaki said He is ME-TOO

    Richard Guenette said Everyone no’s JuanP is us Dr. Were not foolin anyb…

    FamousDrScanlon said Abraham van reassignment, how come when you’re spo…

    REAL Green said Everyone no’s JuanP is us Davy. Were not foolin an…

    FamousDrScanlon said Abraham van reassignment, how come when you’…

  21. Davy on Fri, 10th Jul 2020 2:38 pm 

    JuanP, juanPee, Juanp, juanPeePee.
    juanPee, juanP, juanPee, juanPeePee.
    JuanP, JuanP, juanpeePe.

    So there

    dumbasses

  22. REAL Green on Fri, 10th Jul 2020 2:40 pm 

    Can we see the docter now Davy?

  23. JuanP on Fri, 10th Jul 2020 3:30 pm 

    JuanP, juanPee, Juanp, juanPeePee.
    juanPee, juanP, juanPee, juanPeePee.
    JuanP, JuanP, juanpeePe.

    So there

    dumbasses

  24. JuanP on Fri, 10th Jul 2020 3:31 pm 

    Can we see the docter now Dr Scanlon?

  25. FamousDrScanlon on Fri, 10th Jul 2020 3:32 pm 

    My child Juan, you are supposed to be in therepy. Pleae return to your classroom.

  26. Davy on Fri, 10th Jul 2020 3:59 pm 

    Yes we are, but we are too busy neutering juanpee to get the help I need. Once junapee is deported back to the Philippines, then maybe I will look at any free therapy options I can find.

  27. Annunaki on Fri, 10th Jul 2020 4:25 pm 

    Yes we are, but we are too busy neutering juanpee to get the help I need. Once junapee is deported back to the Philippines, then maybe I will look at any free therapy options I can find.

  28. JuanP on Fri, 10th Jul 2020 4:29 pm 

    “Absolutely! Annunaki And I expect this to happen again and again down here. I need help. The vast majority of people know I am a lunatic, mostly thanks to government help and savings, I continue to live here in the US but now the government help is gone and my savings have been spent. If the government doesn’t help me again then the economic damage will be very significant this time. And every new mental episode will be worse than the one before.”

  29. Davy on Fri, 10th Jul 2020 6:33 pm 

    “Absolutely! Annunaki And I expect this to happen again and again down here. I need help. The vast majority of people know I am a lunatic, mostly thanks to government help and savings, I continue to live here in the Ozark swamplands, but now the government help is gone and my savings have been spent. If the government doesn’t help me again then the economic damage will be very significant this time. And every new mental episode will be worse than the one before.”

  30. makati1 on Fri, 10th Jul 2020 6:42 pm 

    “Absolutely! Annunaki And I expect this to happen again and again down here. I need help. The vast majority of people know I am a lunatic, mostly thanks to government help and savings, I continue to live here in the Philippines swamplands, but now the government help is gone and my savings have been spent. If the government doesn’t help me again then the economic damage will be very significant this time. And every new mental episode will be worse than the one before.”

  31. Eileenchate on Sat, 11th Jul 2020 4:22 pm 

    Inside Bray Wyatt’s mind: WWE Canvas 2 Canvas

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