World Economic Prospects Monthly

Overview: Q2 outlook darkens further, but pick‐up in H2▀ We have cut our global GDP growth forecast for 2020 again, reflecting a more pessimistic assessment of the economic hit from ongoing lockdowns. While we still expect a rebound in H2 this year, the very weak H1 means that world GDP is now expected to contract by 4.8% in 2020 as a whole. ▀ Latest activity news has continued to strike a downbeat tone. The available Q1 GDP data show that the global economy was already slowing sharply before the peak global lockdown was reached in April, partly reflecting shifting consumer behaviour prior to full lockdowns coming into force. The likely Q1 fall in global GDP of over 3% is nearly as large as the entire global contraction during the global financial crisis. ▀ And in April, a number of key surveys have plumbed new lows, suggesting that the global downturn worsened in early‐Q2 as lockdowns tightened. While there is a large degree of uncertainty surrounding the extent to which global GDP will shrink in Q2, we think the fall could be almost twice as large as in Q1. ▀ As a result, our 2020 world GDP growth forecast has been cut to −4.8% from −2.8% last month. This largely reflects notable downward adjustments to our US and European forecasts, but around 0.4pp of the revision reflects a technical change to the way that the global aggregate is calculated. ▀ We still expect a solid growth bounce in H2 as lockdown restrictions are gradually unwound, but consumer services involving social contact will face a slower recovery than other sectors that can more easily accommodate social distancing. ▀ Global GDP is forecast to return to its Q4 2019 level by early‐2021, but there will be longer‐term costs from the outbreak. We do not expect the level of GDP to converge to the forecast path seen prior to the COVID‐19 outbreak due to shifts in behaviour such as increased precautionary savings. Indeed, in 2023 we now expect the average level of GDP to be 1.7% below the level forecast in January.