The global recession is here and now

Standard and Poors (S&P) reviewed its macro outlooks to incorporated the covid-19´s impact in the global economy. S&P acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak and therefore it is difficult to measure how much output will be permanently lost. In this sense, S&P remarks that it will continue to monitor developments and it will update its forecasts as necessary. 

The report points to some interesting considerations that may apply to economic forecasts from other institutions. For instance although growing restrictions on person-to-person contact will affect economic activity, there are no empirical rules to estimate how this social distancing could affect key economic variables, which makes more difficult medium and long term forecast.

Please find below some highlights of S&P macro outlook:

• S&P assumes that the peak of the pandemic will be between June and August and according to its conclusions measures already announced to contain covid-19 have pushed the global economy into recession and could cause a surge of defaults among nonfinancial corporate borrowers. 
• The initial data from China suggests that its economy was hit far harder than projected, though a tentative stabilization has begun.
• Europe and the U.S. are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year.