World economy in deep freeze for months, EIU says

World economy in deep freeze for months, EIU says


The coronavirus outbreak will thrust economies around the world into “deep freeze,” one analyst told CNBC Monday, with some unprecedented lockdown measures likely to remain in place for months.

An intensifying health crisis has meant countries around the globe have effectively had to shut down, with draconian measures placing massive restrictions on the daily lives of hundreds of millions of people.

To date, more than 723,000 people have contracted COVID-19 worldwide, with 34,018 deaths, according to data compiled by Johns Hopkins University.

“I think, right now, the key issue is to try and do something that’s basically never been done before in the world,” Matthew Oxenford, lead U.K. analyst at the Economist Intelligence Unit (EIU), told CNBC’s “Squawk Box Europe” Monday.

That is to “put most economies on life support — into some sort of deep freeze — that they can come out of in three, probably more like six, months,” he added.

All advanced economies ‘will suffer a recession this year’

The measures brought in to tackle the coronavirus outbreak range from so-called nationwide lockdowns and school closures to strict regulations on social distancing and public gatherings.

In the U.S., which has now reported by far the most coronavirus cases worldwide, President Donald Trump has conceded social-distancing guidelines will now need to stay in place until at least April 30.

He had previously indicated these measures could be relaxed as soon as mid-April.

More than 143,000 cases of the coronavirus have been reported in the U.S. to date, with the country overtaking both Italy and China last week in the number of confirmed infections.

Snow falls as people wearing face masks walk through the Asakusa district on March 29, 2020 in Tokyo, Japan.

Tomohiro Ohsumi | Getty Images

Analysts at Berenberg believe the outbreak will mean all advanced economies will suffer a recession this year, with the world’s largest economy set to register a 3% drop in year-on-year annual gross domestic product (GDP).

“At least for the months March to May, economic data will show a contraction not seen before in peacetime,” analysts at Berenberg said in a research note published Sunday.

“This year, all advanced economies will suffer a recession with year-on-year declines in annual GDP ranging from 3% in the U.S. to circa 7.5% in Italy,” they predicted.

‘Unprecedented in peacetime’

In a daily press conference on the coronavirus outbreak in the U.K. on Sunday, a senior medical official warned some lockdown measures could last months and would only be gradually lifted.

“If we do well it moves forward and comes down and we manage to care through our health and care systems sensibly in a controlled way and that is what we are aiming for,” Jenny Harries, deputy chief medical officer for England, said at a news conference.

“This is not to say we would be in complete lockdown for six months but it means that as a nation we have to be really, really responsible and keep doing what we are all doing until we are sure that we can gradually start lifting various interventions,” she added.

The U.K. has recorded almost 20,000 cases of the coronavirus, with 1,228 deaths.

A woman wearing a protective face mask crosses the road in front of the Bank of England in what would normally be the morning rush hour in the City of London on March 17th, 2020. The financial district of the UK is unusually quiet after the government requested people to refrain from all but essential travel and activities yesterday.

Jonathan Perugia

The Bank of England held interest rates steady at a record-low level of 0.1% last week, following two emergency rate cuts earlier this month.

The central bank has also recently boosted its bond-buying program in an effort to offset some of the economic impact of the coronavirus outbreak.

“The Bank of England has been coordinating with the Treasury in a way that’s been unprecedented in peacetime,” the EIU’s Oxenford said.

“The central bank is basically moving from looking at interest rate levels to backstopping government debt for what could be a very long period of time,” he added.


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