GDP growth forecast sinks on COVID-19 fears

17:08 PM | March 10, 2020 | Vincent Valk

The growing economic impact of coronavirus disease 2019 (COVID-19) has resulted in significant downgrades to IHS Markit’s GDP growth forecasts. World GDP is now expected to rise by 1.7% in 2020, compared with a projection for 2.5% growth previously. US GDP is expected to rise by 1.8% this year, with growth totaling 4.3% in China, and the eurozone flat. This compares with a prior forecast of 2.1% GDP growth for the US, 5.4% growth for China, and 0.9% growth for the eurozone.

COVID-19’s full impact is likely yet to be felt. “The number of global cases is assumed to top out by the third quarter,” IHS Markit says. “The result is a U-shaped rather than V-shaped cycle, as a sharp reduction in near-term growth is followed by a slow recovery. Forecast risks are weighted to the downside.”

Japan and the eurozone are viewed as likely to tip into recession sometime this year, largely due to COVID-19, IHS Markit adds. The US is currently forecast to avoid a recession, although the risk of one is significant, according to IHS Markit chief economist Nariman Behravesh. “While the US economy will be hurt by the effects of the virus, we believe the momentum of the economy is strong enough to avoid a recession,” Behravesh says.