Global GDP set to fall further

18 May 2020

Janet Henry, Global Chief Economist, HSBC

With the COVID-19 pandemic continuing to damage economies across the world, and with few clear signs of an end to the crisis, we have lowered our outlook for global GDP.

At the beginning of April, we foresaw a 3.3 per cent contraction for 2020 – a sharper fall than the worst of the 2008-2009 financial crisis. However, events have moved on over the last six weeks. We now expect global GDP to drop by 4.8 per cent.

This change is driven by a number of factors. First, many countries have either tightened lockdown restrictions or extended their duration, particularly in the emerging world, including in Latin America and Russia, and a number of countries in Asia such as Indonesia which had previously avoided formal suppression measures. Using our new output model for emerging economies, we can consider what impact these lockdowns are likely to have on domestic demand.

Second, we now have first quarter GDP data for the three largest economies in the world – US, China and the eurozone – and several others. That means we have a better idea of what the economic damage is from at least the initial stages of the lockdown. This is a useful indication of what may be happening elsewhere.