The World Bank said on Tuesday that the global economy will contract by 5.2 per cent in 2020, representing the deepest recession since World War II.
After last week’s report that 60 million people could be pushed into extreme poverty because of the coronavirus outbreak, the bank also said that the largest fraction of economies are currently experiencing their first decline per capita output since 1870.
Activity in advance economies is expected to contract by 7 per cent, as “domestic demand and supply, trade, and finance have been severely disrupted.”
Emerging markets and developing economies are also expected to contract by 2.5 per cent, the first contraction as a group in at least six years.
“The blow is hitting hardest in countries where the pandemic has been the most severe and where there is a heavy reliance on global trade, tourism, commodity exports, and external financing,” its report said.
The US and Japanese economies are supposed to contract by 6.1 per cent in 2020, as their economies reflect the disruptions associated with preventive measures that have slowed economic activity.
Europe’s GDP is suspected to contract 9.1 per cent in 2020 with widespread outbreaks in many countries.
For Thailand, the World Bank anticipates a contraction of 5 per cent which is in line with the Bank of Thailand’s expected recession of 5.3 per cent. Only China is expected to expand by 6 per cent in 2020.
However, the bank also predicts that when economic activities gradually resume, it will lead to a global GDP expansion of at least 4.2 per cent in 2021.
Worse outlook
Citing worse than expected drops in tourism, SCB Economic Intelligence Center (EIC) and KKP Research have last week lowered their GDP predictions for 2020 to a recession of 7.3 per cent and 9 per cent respectively.
For EIC, its chief economist and the bank’s first executive vice-president Yunyong Thaicharoen said on Friday that the downgrade projection from a contraction of 5.6 per cent to a contraction of 7.3 per cent was due to “larger-than-expected” impact from the coronavirus outbreak.
“The main reason is the number of tourists which dropped to 9.8 million people, in comparison to around 40 million [in 2019],” he said. “That would represent an annual drop of 75 per cent which is significant because the income from the [tourism] sector accounts for 12 per cent of the GDP.”
The EIC added that the notable events that prompted its downward revision included the prolonged travel ban in Thailand, the slow and gradual international travel ban lifts in various countries, and a worse-than-expected global economic outlook with repercussions on tourists’ income.
For the second half of 2020, the EIC foresees a U-shaped recovery which would be gradual but uneven across sectors.
Despite such a slow down in growth, food, beverages, medical services, and telecommunications are expected to lead the recovery with the support of the government’s money transfer and debt holiday scheme.
On the other hand, the recovery for tourism, especially for sub-sectors with high reliance on foreign tourists, will be gradual. Industries that were hit hard, such as hotels, restaurants, entertainment, and logistics, will also see slow improvement.
This is because their growth will still be limited by virus containment measures and travel concerns which will persist as long as there isn’t any available vaccine.
The recovery for automobile and real estate, specifically residential real estate, will also be slow because of weak foreign and domestic demand due to low employment, diminished household income, historically low consumer confidence, and prudence loan approvals among financial institutions.
