Millions of job losses in coming weeks as global GDP set to fall 0.4 per cent: Moody’s

TOPSHOT - People wearing facemasks as a preventative measure following a coronavirus outbreak which began in the Chinese city of Wuhan, line up to purchase face masks from a makeshift stall after queueing for hours following a registration process during which they were given a pre-sales ticket, in Hong Kong on February 5, 2020. - The new coronavirus which appeared late December has claimed nearly 500 lives, infected more than 24,000 people in mainland China and spread to more than 20 countries. (Photo by Anthony WALLACE / AFP) (Photo by ANTHONY WALLACE/AFP via Getty Images)

Emerging economies will be hammered given the collapse in oil and other commodity prices

March 24, 2020

New Delhi: With the Coronavirus now shutting down travel, trade and many businesses, the global economy is expected to suffer with real Gross Domestic Product (GDP) falling by 0.4 per cent in 2020, as against an earlier GDP growth projection of 2.6 per cent made in January, Moody’s Analytics said in a report today.

“More financial pain is quickly coming as layoffs mount, businesses curtail investment, and retirement nest eggs evaporate,” said Mark Zandi, Chief Economist at Moody’s Analytics, adding, “Millions of job losses are likely in coming weeks, particularly for households that live paycheck to paycheck.”

The report states Chinese GDP is on track to decline by 27 per cent at an annualized rate in the first quarter and US businesses have immediately laid off workers. Initial claims for unemployment insurance spiked last week (the week of March 8) to over 280,000 from about 210,000 the week before.

“U.S. claims of over 240,000 per week are consistent with no job growth,” the report said, adding a massive and mounting monetary and fiscal policy response will limit the economic damage in the US compared with much of the rest of the world. Moody’s Analytics expects lawmakers to ultimately provide $1.65 trillion in discretionary fiscal stimulus in the US.

The report said emerging economies will be hammered given the collapse in oil and other commodity prices, which are staples for many Latin American, Middle Eastern and African economies. The price of a barrel of West Texas Intermediate has slumped to below $25 on weaker global demand and the recent brinkmanship between Saudi Arabia and Russia over who should bear the brunt of necessary oil production cuts.

Asia appears past the worst of the virus, and while there is still considerable economic fallout to come, the region’s economy should be able to eke out a small gain in GDP this year, according to the report.