Global economic growth projected to fall by 4.3% in 2020, according to leading macroeconomic influencers

27 August 2020 (Last Updated August 27th, 2020 07:25)

Global economic growth projected to fall by 4.3% in 2020, according to leading macroeconomic influencers

The global economy is gradually showing signs of recovery after a major decline in the first half of the year. The growth of the economy is expected to continue from the second half although the labour market will take a long time to recover. Macroeconomic influencers share their views on the Covid -19 impact.

Erik Meyersson

Erik Meyersson, senior economist at Svenska Handelsbanken, a Swedish bank, shared a report on the latest forecast issued by the bank. The report notes that the global economy is showing signs of recovery after a historic fall in economic activity in the first half.

The impact of the pandemic, however, has been different across countries. While Nordic countries managed to handle the pandemic better, the European Union and the US have been severely impacted.

The report notes that global growth is expected to decline by 4.3% in 2020, followed by a 5.2% growth in 2021 and 3.5% growth in 2022. Infection rates and lockdown restrictions, however, will play a major role in the growth of the global economy.

Adam Tooze

Adam Tooze, director of European Institute, shared an article on how China’s monetary stimulus is constrained despite the impact of the Covid-19 pandemic. The article attributes this to the People’s Bank of China’s (PBOC) policies adopted during the early 2000s. The policies limited the appreciation of yuan, while China had a huge trade surplus and the PBOC’s assets increased by 70% of GDP in 2008.

Compared to other banks such as the Federal Reserve, the European Central Bank and the Bank of Japan, which have increased purchase of government bonds, the PBOC has not added to its assets. The PBOC’s balance sheet is currently the same as the Fed at 35%.

The improved economic conditions in the country as the pandemic remains under control and the lower level of interventions by the bank are the main reasons for the constrained spending, the article adds.

BLackSUnrise

BLackSUnrise, an economist, shared an article on the declining value of the euro despite the steps taken by the European Central Bank (ECB) to prevent the European economy from slipping into a recession.

The ECB has purchased approximately €3tn of assets through quantitative easing programme and interest rates have entered the negative territory but the European economy has shown little signs of recovery.

The article notes that the current rebound of the euro is only temporary due to a weak US dollar, which could rebound any time undermining the value of the euro.