USA and Europe fall into "recession COVID-19"

The U.S. and global economies are in recession, with forecasts being revised as the Corona 2019 virus (COVID-19) spreads around the World, ending the last 10 years of US economic expansion, according to Nariman Behravesh - economic director of IHS Markit.

"There is no question about whether we are in a recession," Behravesh said Thursday in the JOC webcast, TPM20 Workshop: What we missed - The prospects for container shipping and trade and economy. "The only question is how deep the recession is." Also on Thursday, IHS Markit, the parent company of JOC.com, forecasts the US economy with growth to only 0.2% by 2020, “but that will soon be revised down at least. -1%, maybe on weekends, ”Behravesh told more than 1,100 logistics executives who attended the webcast.

The immediate cause of the economic downturn is due to the spreading of the Corona virus, or more precisely the precautions for the Corona virus, he said. "So far, it seems that the only way to stop it [COVID-19] is to freeze economic activity, and that causes the economy to fall into recession," Behravesh said. "The virus itself is not killing the economy, but reacting to it is causing us a recession."

Behravesh was scheduled to speak on March 2 at the TPM20 Conference in Long Beach, but that conference was canceled as the Corona virus spread to the United States. At the time, only about 15 confirmed COVID-19 cases in the US and Thursday had more than 10,400, with about 150 deaths in the United States caused by the virus, according to the Centers for Disease Control.

The global economy is still expected to increase by 0.7% by 2020, this figure could be adjusted downward, and then return to 2.4% by 2021. That number is still lower than the 2.6% growth predicted by IHS Markit of the world economy before the initial outbreak of Corona virus in China's Hubei province.

"According to IHS Markit's definition, any growth rate below 2% in the global economy is considered a global economic recession," said Behravesh. But the 2008-09 global economic downturn was much more severe. "During that crisis, the world gross domestic product [GDP] dropped by 1.7%," he said. “We are far from that. And we can still have that, but for now we don't mention it. ”

Global trade negative growth trend

The COVID-19 pandemic will reduce global trade volume, due to the declining demand due to isolation, closure and travel ban in China, Europe, the United States and other countries. The effect of wages lost during isolation on consumer spending will be the second impact on demand. "We need a lot of help for households who are not making money now because they don't work," said Behravesh.

But the economic downturn probably won't be as bad as the big recession. "Before the virus hit, global trade was weak but not negative," Behravesh said. "Right now, we are thinking about a 1 to 2 percent negative growth."

If the global GDP forecast is revised down from a 0.7% growth to a negative 1%, then we will see a negative growth of 5% in trade volume, down from 5% to 10%. ”, According to Mr. Behravesh. During the 2008-09 recession, "transaction volume fell by 15%, if only briefly," he said.

In other words, for the freight industry, "it will get worse before it recovers," Behravesh said.

Italy, where more people died of COVID-19 than in China - with 3,405 people on Thursday, according to data posted by Johns Hopkins University - could be the worst economic blow in the world.

"Italy's GDP fell 3.5%, while other European countries were less vulnerable." Italy has been in decline, Behravesh said. Now the whole Eurozone and UK is facing a recession this year.

The recession of COVID-19 will not be a rapid recession and recovery in a "V-shape", but in a "U-shaped", he warned.

"When everything is clear, the recovery will slow down," said Behravesh. For example, after the September 11, 2001 terrorist attack, it took more than two years before the number of passengers did not exceed the pre-strike level, and “the airlines said this was bad. more than 9/11 to them.

"Measures against COVID-19 will cost the aviation industry between US $ 63 billion and US $ 113 billion in revenue this year, the International Air Transport Association (IATA) estimates on March 5, a the figure could be adjusted to increase due to the rapid spread of the Corona virus in the past two weeks and the figure of revenue loss of air freight is still unknown.

The immediate need in the United States is the fiscal policy that benefits those vulnerable to isolation. "Checks for people don't mean anything, send checks to people who need them." “Rescuing small companies makes sense. The $ 1.2 trillion financial package may be approved, but they may need more than that.”

Phaata (Source: JOC)

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