The outlook of the global economy is not as grim as expected. According to the research data analyzed and gathered by Stock Apps, there will be a 4.5% drop in global GDP in 2020 as opposed to the 6% global decline experts estimated in June 2020.
On the bright side, an OECD Economic Outlook report for September 2020 forecasts a remarkable recovery by 2021, marked by a 5.0% GDP growth.
In 2020, the Euro area will be one of the most adversely affected as its GDP will plummet by 7.9%. On the other hand, the G20 will suffer a 4.1% decline, nearly half of the Euro area’s drop. Comparatively, in 2019, the Euro area had reported a 1.3% growth while the G20 countries had grown by 2.9%.
Just like the global economy, Euro’s GDP will bounce back in 2021, with a 5.1% increase, while that of G20 countries will shoot up by 5.7%.
In the June report, the OECD had predicted that the UK would have the worst contraction compared to the major G20 economies. South Africa, which is set to sink by 11.5% took the UK’s place in the new report.
Argentina followed closely behind with an estimated 11.2% drop. Italy will be the third worst hit with a projected 10.5% drop while India and Mexico will tie with a 10.2% decline. The UK will still be among the hardest hit economies, sinking by 10.1%.
Though the outcome is not as bad as anticipated, the report points out that the global economy is still facing unprecedented damage based on recent history. According to WeForum, the economic shock experienced in 2020 is three times worse than the 2008 financial crisis in terms of annual GDP decline. The OECD report points out that the hit would have been far worse if it not for policymakers’ rapid reaction.
The global GDP could rebound to pre-pandemic levels by 2021. However, that will depend on health measures, business confidence and the likelihood of future waves of the pandemic.
China’s Economy Could be worth $14.6 Trillion in 2020, 17.5% of Global GDP
The aforementioned OECD report highlights the fact that all G20 economies with the exception of China will suffer an economic recession in 2020. It projects a 1.8% GDP growth for China in 2020.
In 2019, China’s economy had grown by 6.1%. According to the forecast, it could soar 8.0% in 2021.
Summer projections from the World Bank paint a similar picture, projecting a 1.6% GDP growth for China in 2020, against a 5.2% global contraction.
According to CNN Business, by the end of 2020, China’s economy could be worth $14.6 trillion. This will give it a 17.5% share of the global GDP.
In the first week of October 2020, China celebrated the Golden Week, ending on October 8. Marking the Moon Festival and the founding of the People’s Republic of China, the period was the busiest travel season in 2020.
Over 630 million people traveled around the country, 80% higher than those who traveled in 2019. Tourist spending shot up by 70% compared to 2019 to reach $70 billion while movie ticket sales hit $580 million, only 12% less than the number in 2019.
Overall, the July to September quarter of 2020 saw China’s economy surge by 4.9% year-over-year (YoY). During the previous quarter, Q2 2020, it had reported a 3.2% growth. The robust growth in Q3 has brought its economy close to its pre-pandemic growth rate of 6%.
US GDP to Sink by 3.8% in 2020 as Four Powerhouse States Lag Behind
The US is set to suffer a 3.8% GDP decline in 2020. In comparison, it had grown 2.2% in 2019 and the report projects that it will grow by 4.0% in 2021.
Morgan Stanley projects that the US economy could recover to pre-pandemic levels two quarters earlier than the previously anticipated Q4 2021. However, the report points out that much of the recovery is fuelled by debt-based government spending. As such, the private sector will likely need more time.
Unfortunately, the recovery is hampered by underperformance in four key states: California, New York, Texas and Florida. These four states account for 35% of the country’s economic output and around 30% of the US population.
According to an Oxford index that tracks economic recovery, the four are collectively lagging over 10 percentage points behind the rest of the country.