COVID-19 Macroeconomic Update: The Global Recession Is Here And Now

The spread of the virus, which the World Health Organization declared to be a pandemic on March 11, appears to be stabilizing in much of Asia. However, the increasing restrictions on person-to-person contact in Europe and the U.S. have sent markets reeling as risk-aversion rises and views on economic activity, earnings, and credit quality deteriorate sharply. As a result, we now forecast a global recession this year, with annual GDP rising 1%-1.5%.

China's first macroeconomic data capturing the effects of COVID-19 was much worse than expected. Industrial production in China fell a staggering 12.3% in January-February compared with the same period last year, four times the consensus forecast decline. Moreover, while assumptions around the peak timing of the virus turned out to be broadly valid, the projections around the path of the rebound now look optimistic. Risks of...