Bloomberg Businessweek March 16, 2020 pp4-7 COVID-19/Economy “What will this do to the economy?” and “How much could this hurt GDP?”
Wishing to avoid illness and death from COVID-19 China, Italy and other countries around the world including America have been and are making dramatic changes to our personal and business lives. China being able to enact probably the most widespread measures may now have wrestled COVID-19 but their Q1 GDP will be 1.2% or the lowest on record. For most of America, large gatherings are prohibited, restaurants-bars-and-theatres are reducing services or closing and schools are closing at least for the short-term. These efforts understandably will directly impact our economy.
Without even waiting for individual companies to reforecast their financials, investors have been reacting to the economic uncertainty caused by COVID-19, and efforts to limit the spread, by pulling back from the stock market nearly 30% from its peak in February. The aftermath is that all Americans, invested or otherwise, view market declines as a clear signal of a weakening economic future. Consequently and abruptly, consumers pull back on discretionary spending small and large. Companies cut back on hiring, do layoffs and stop capital spending further eroding consumer confidence.
In the next few weeks, besides federal “bailouts” for business and individuals, we likely will be considering and dialoging about whether it is possible to “live with the virus” and restore some normal operations. Can we be reopening businesses, factories and schools by adopting reasonable precautions likely to limit the spread of COVID-19 while ensuring safety of those impacted with severe disease? Many worry, that If America stays fully shutdown, the economic downturn will lead to recession and high unemployment.
In the last weeks, economists have revised the 2020 U. S. G.D.P. from about 2% to 1.2-1.3%. Under the worse Scenario of a "True Global Pandemic” economists at Bloomberg estimate the following G.D.P changes (2020 Baseline to Worst Scenario); Hong Kong -0.3% to -5.7%, Russia 2.1% to -2.8%, South Korea 2.2% to -2%, France 0.9% to -2.6%, Germany 0.7% to -2.7%, Spain 1.5% to -1.8%, U.K. 1.2% to -0.9%, Mexico 2.3% to -1.5%, Canada 1.2% to -1.8%, China 5.9% to 3.6% and America 2% to -3%.