The Guardian (Charlottetown)

World economic recovery looks ever more shaky: Reuters poll

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The world economic outlook has dimmed again, with still rising coronaviru­s infections and the risk of renewed lockdowns increasing the chances that any rebound will reverse course, according to Reuters polls of over 500 economists globally.

Over 17 million people have been infected worldwide by the coronaviru­s and more than two-thirds of a million people have died. That has forced government­s to impose strict lockdown measures to curb the spread of the virus, keeping citizens at home and businesses closed and spurring recessions that aren’t over yet.

Surging cases in the United States, where related deaths have surpassed 150,000, have led several states to reimpose restrictio­ns. Most economists, long-term investors and even Fed Chair Jerome Powell have clearly said the economic outlook depends significan­tly on the course of the virus.

The Fed has pledged endless stimulus to support the world’s No. 1 economy, which was a major growth engine for the global economy before the pandemic and now risks being the biggest drag, sending the dollar to a two-year low.

With infections also on the rise elsewhere, including in Australia, India, Spain, and Brazil, economists again cut this year’s economic prospects in the July 3-29 polls, which show the worst contractio­n on record for the world economy in 2020.

“We expect the economic reality of the virus to start catching up with businesses across the globe soon,” said Jan Lambregts, global head financial markets research at Rabobank.

“What we need is a vaccine or significan­t breakthrou­ghs in medicines to decisively reopen our economies and restore business and consumer confidence – but there is no magic wand for the time being.”

Reuters polls since the start of the pandemic follow a pattern: repeated downgrades to the near-term outlook, with economists shifting an expected recovery in the second half of the year to 2021, flattening out an initial V-shaped assumption.

The global economy was expected to shrink four per cent this year, or by about $3.4 trillion, roughly equivalent to wiping out the economies of Canada and Australia entirely. That is down from -3.7 per cent predicted in June, the sixth consecutiv­e downgrade to forecasts from 3.1 per cent growth forecast in January.

The world economy is expected to grow 5.3 per cent next year, slightly less than the 5.4 per cent predicted last month. But those expectatio­ns are based on the disease being contained, with widespread hopes of a vaccine sometime soon.

But under a worst-case scenario, it will contract 6.5 per cent this year, much worse than the Internatio­nal Monetary Fund’s -4.9 per cent projection, then grow just Two per cent next year.

“Over six months into the crisis, evidence is mounting that the global economy is likely to look lastingly different due to the pandemic,” noted Christian Keller, head of economics research at Barclays.

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