China's economy was hit harder than expected during the first quarter but will move into recovery mode as the US bears the brunt of the pandemic druing the second quarter, new reports by ratings agency S&P Global suggest.
For the US, the year-on-year decline in GDP in the second quarter now looks to be at least double the 6 per cent contraction S&P estimated just last week.
It's economists now expect a contraction in the first quarter as well.
Meanwhile Europe's GDP decline for the first half of the year looks to be similar to the US - but with a larger decline in the first quarter than the second, because the shock started earlier there.
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The bright spot currently is that the spread of the virus appears largely contained in China, and its economy seems to be stabilising, S&P economists say.
"Anecdotal evidence -such as traffic patterns and shipping data - as well as official figures show that economic activity is beginning to recover, albeit at a slower rate than originally expected."
S&P estimates that China's GDP contracted 13 per cent (annualised) in the first quarter but should begin to grow again in the second quarter.
For 2020 as a whole, S&P now forecasts 2.9 per cent growth from 4.8 per cent previously.
The forecast assumes that year-on-year growth rates turn positive in the third quarter at about 8 per cent and peak well into double-digits in the first quarter of 2021.
That translates to a full year 2021 growth forecast at 8.6 per cent - a dramatic recovery.
"As activity picks up, Chinese demand for imports from Asia-Pacific should begin to recover slowly."
That will help to partially offset the shock from the US and Europe, the report says.
S&P Global Ratings economists say they acknowledge a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak.
"Some government authorities estimate the pandemic will peak between June and August, and we are using this assumption in assessing the economic and credit implications."
From optimistic point of view they argue that the economic recover can begin in that time frame, then "if there is little or no permanent change to the labour force, capital stock, or productivity, which seems likely, then potential GDP growth won't change".
"There might be a permanent loss in output, but fiscal policy could create enough demand to largely offset the loss of private demand."
Speed is of the essence, they say, "as is fostering a setting in which the economy - labour markets and supply chains based on small and medium-sized businesses, in particular - can get back to normal quickly once the pandemic passes."
"The longer it takes for governments to implement fiscal support, the more damage there'll be to the economy. Regardless, the hit to growth in the first half of the year will be worse than we thought last week."