Corona shocks weakened global economy

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The outbreak of the coronavirus has shocked an already weakened global economy. ABN AMRO Group Economics has therefore downgraded its economic forecasts and made an extensive analysis of the situation.

Our expectations are based on the crucial assumption that concentrations of infection outside China can be reasonably controlled in terms of spread Sandra Phlippen Chief Economist ABN AMRO

The full analysis is available on ABN AMRO Insights.

Until recently, the coronavirus had mainly affected demand in China and supply chains in the global economy. Sandra Phlippen, Chief Economist at ABN AMRO, is now seeing growth slow down in countries outside of China where a daily growing group of people are contracting the virus. “The economies in which the virus is most prevalent are Italy, South Korea, Japan and Singapore. Together they comprise 8 per cent of the global economy. The virus is expected to continue to spread, although we don’t know how quickly. This, together with governments’ measures to contain the spread and the fact that households are cancelling travel worldwide, is slowing global economic growth more strongly and for longer than we had expected,” says Sandra.

Group Economics expects to see a relatively large number of tax measures designed to prevent a recession. The total stimulus package will be a mixture of monetary and fiscal policy. A clear economic recovery is expected to take place at the end of the year, assuming the virus is under control by the end of the second quarter.

“Our expectations are based on the crucial assumption that concentrations of infection outside China can be reasonably controlled in terms of spread,” Sandra explains. “If the virus at these locations turns out to be uncontrollable, we will have to adjust our expectations to a scenario in which a global recession occurs alongside a pandemic.”

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