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How Badly will the Global Economy be impacted by COVID-19

by David Kerr | Apr 09, 2020


Since the disruption of global economies has a major impact on all the products and services covered by Strategy Analytics (SA), this analysis was created to provide a common frame of reference for the more detailed analysis that is being produced by individual services for their audiences.

The impact of the COVID-19 catalyst, demand disruption, loss of consumer confidence, rising unemployment, further decline in corporate balance sheets, and loss of value for consumer equity assets as well as these other factors will be a major recession.

The current analysis by Strategy Analytics indicates that the severity of this recession as measured by change in Real GDP will be unprecedented looking back to the Great Depression.

The physical and emotional toll of the virus will be long lasting. Consumer confidence in the world's major economies has plummeted. The covid-19 crisis has brought a turning point that has ended for the next few quarters at least over 11 years of boom times. 

SA has assessed the impact and developed two scenarios for the impact on GDP growth. Scenario One is a Deep U curve and scenario two is a Deep Extended Length U curve. We don't believe the narcotic of government stimulus will be enough to convince tens of millions of consumers to spend freely when the pain of such recent insecurity, displacement and economic losses is so raw.

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In two scenarios, Strategy Analytics anticipates:

  • A minimum of a three-quarter recession beginning in Q2 20. SA has created two scenarios assuming a “U” shaped downturn. The first, a recession is three quarters in duration defined as “Deep U-shaped” recession and a more severe recession lasting four quarters and designated as “DeepXL U-shaped” recession. For 2020, the Deep U scenario drops real GDP in the US by -11.1% while the more severe DeepXL U drops real GDP by -14.2%.
Download our full report Covid-19 Catalyst for Economic Disruption here.

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