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Ratings agency Fitch predicts deep recession in 2020 on back of coronavirus pandemic

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A red London bus travels past closed-down shops on an empty Regent Street in London on April 2, 2020, as life in Britain continues during the nationwide lockdown to combat the novel coronavirus pandemic. - Prime Minister Boris Johnson said Britain would "massively increase testing" amid a growing wave of criticism on Thursday about his government's failure to provide widespread coronavirus screening. (Photo by Tolga AKMEN / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)

Ratings agency Fitch today predicted a deep global recession in 2020 following the rapid global spread of coronavirus.

Fitch said it expected worldwide economic activity to decline 1.9 per cent in 2020, with US, eurozone and UK GDP down by 3.3 per cent, 4.2 per cent and 3.9 per cent respectively.

It said it expected China’s recovery from coronavirus disruption to be hit by the global slowdown and forecast annual growth of below two per cent for the Asian powerhouse.

“The forecast fall in global GDP for the year as a whole is on a par with the global financial crisis but the immediate hit to activity and jobs in the first half of this year will be worse”, said Brian Coulton, Fitch’s chief economist.

The effect of the lockdowns in Europe and the US could reduce GDP by seven or eight per cent, or 28 per cent to 30 per cent annualised, Fitch said.

“This is an unprecedented peacetime one-quarter fall in GDP and is similar to what we now estimate occurred in China [in the first quarter],” the agency said.

“Our baseline forecast does not see GDP reverting to its pre-virus levels until late 2021 in the US and Europe,” said Coulton.

Separately, economists at the Bank of America today said they expected this recession to be the “deepest on record”.

They predicted three consecutive quarters of GDP contraction in the US, with the economy shrinking seven per cent in the first quarter, 30 per cent in the second quarter and one per cent in the third quarter.

“We forecast the cumulative decline in GDP to be 10.4% and this will be the deepest recession on record, nearly five times more severe than the post-war average,” they said.

Bank of America also said that US unemployment could hit a peak of 15.6 per cent with between 16m and 20m jobs lost.

US unemployment figures today showed more than 6.6m Americans filed for unemployment benefits for the first time last week, eclipsing the previous record of 3.3m jobless claims set the previous week as coronavirus crashes the US economy.

“Today’s jobless claims of 6.6m is ten times the pre-Covid record of 665,000 experienced in 2009,” said Ronald Temple, Lazard’s head of US equity.

He said it suggests “the unemployment rate reported in a month will exceed 10 per cent”.