"The global recession is here and now," says credit agency S&P Global Ratings.
In the wake of the global coronavirus lockdown, a series of new reports by economists paints a grim picture of what the world faces in 2020.
A United Nations report forecasts the Covid-19 shock will depress global annual growth this year to below 2.5 per cent- the recessionary threshold for the world economy.
S&P Global estimates total global GDP growth at just 1 to 1.5 per cent in 2020, with risks remaining firmly on the downside.
"A recession across Asia-Pacific is now guaranteed due to a deep first-quarter shock in China and the shutdown of activities across G7 economies," S&P said.
Locally, KiwiBank economists have forecast that New Zealand faces a recession of at least three quarters - with risks on the downside.
• Coronavirus: NZ facing worst-case economic scenario, says Grant Robertson
• Coronavirus: Economy 'in the eye of the storm' – Finance Minister Grant Robertson says
• Coronavirus in NZ: Jacinda Adern explains Government's $12 billion economy rescue package
• Coronavirus financial package: A massive, economy-wide wage subsidy shows how serious the situation is
"Without the policy stimulus announced over the last few days, we would have expected a far deeper recession," said KiwiBank chief economist Jarrod Kerr.
"Fortunately, a virus has a lifespan and the economy will eventually get through the worst of the current crisis."
He forecasts the policy stimulus currently in place and pent-up demand this year to see the economy rebound next.
"We have growth rebounding to 3.2 per cent (year on year) by the end of next year."
However he also warns of a "grim downside scenario" if New Zealand faces a widespread outbreak on the scale now seen in Europe.
"The economic shock of an outbreak in NZ is far worse than our central view, but must be taken into consideration," he said.
"Our new downside scenario, of a much faster spread of the disease, would see the economy contract by more than 2 per cent in the year to March."
The global policy response - from central banks and governments - would help cushion but not quickly reverse, these shocks, said S&P Asia-Pacific chief economist Shaun Roach in his regional report.
"The rising scale of the shock will leave permanent scars on balance sheets and in labour
markets, resulting in a more drawn-out, U-shaped recovery ... Unemployment rates will rise."
S&P's Asia Pacific report notes domestic demand will be hit almost everywhere by restrictions on movement and risk aversion "external spillovers" felt through four channels:
• People flows - travel, tourism, and education
• Trade - demand for the region's exports
• Supply chains - disruptions to production
• Commodity prices
Roache warns that the "amplifier", with the potential to tip the region into a financial crisis (on top of economic recession) is tightening financial conditions.
Another S&P Global report focused on credit conditions, said:
"The sudden economic stop will bring to bear intense credit pressure worldwide."
"A cash flow slump and much tighter financing conditions as well as the simultaneous oil price shock will hurt creditworthiness."
"These factors will likely result in a surge in defaults."
S&P Global has stated its confidence in the Australasian banking system to withstand the crisis this year - describing local banks as "extremely strong".
New forecasts by S&P now see 2020 growth for China, India, and Japan at 2.9 per cent, 5.2 per cent and -1.2 per cent (from 4.8 per cent, 5.7 per cent, and -0.4 per cent previously).
It estimates permanent income losses are likely to at least double to about US$400 billion.
"For credit markets, a key question is how these losses are distributed across sovereigns, firms, banks, and households," S&P's Roache said.
"The scars that will be left by these shocks on balance sheets and in labour markets threaten a more drawn out U-shaped recovery."
Timing depends, most of all, on progress in containing viral spread.
"Even if major progress is made during the second quarter, after a sustained period of stressed cash flow many firms will be in no position to resume investing quickly," he said.
"Households that have either lost their jobs or have worked fewer hours will spend less. Banks will be managing the deterioration in asset quality."
Risks to were still on the downside, he said.
The United Nation's downside scenario sees a US$2 trillion shortfall in global income with a $US220 billion hit to developing countries (excluding China).
The most badly affected economies in this scenario will be oil-exporting countries, it says.
"But also other commodity exporters, which stand to lose more than one percentage point of growth, as well as those with strong trade linkages to the initially shocked economies."
S&P Global also notes that the oil price plunge would normally be good news to Asia-Pacific's many net importing nations, but that right now its negative impact on credit markets may pose a more significant threat.
Oil prices have slumped as much as 57 per cent since the start of the year and are expected to fall further