Coface Barometer Q2 2020-From a massive shock to a diversified recovery

A few weeks after the first containment easing measures, economic activity seems to be picking up in most European countries. However, about two months after China, this gradual and partial recovery will not erase the effects of containment on global growth.

In this context, Coface forecasts that the recession in 2020 (a 4.4% drop in world GDP) will be stronger than that of 2009. Despite the recovery expected in 2021 (+5.1%) – assuming there is no second wave of the coronavirus pandemic – GDP would remain 2 to 5 points lower in the United States, the eurozone, Japan, and the United Kingdom, when compared to 2019 levels.

The lack of a rapid catch-up is mainly due to two issues: persistent uncertainty about the evolution of the pandemic leading to an expected rise in household precautionary savings and cancellation of business investment, and the irrecoverable nature of production losses in some sectors (particularly service activities and raw materials used as fuel). Measures taken by central banks have helped to stabilize financial markets since April, especially those of countries (particularly in Western Europe) that have, so far, contributed to maintaining some companies’ production capacities, mainly by increasing debt. Nevertheless, they are also postponing adjustments in employment and corporate cash flow problems.