18 mar
2020
10:35
Markets
Recession in the Economy: What Does It Mean and What Are Forecasts for Recovery?

Experts from leading analytical agencies note that the coronavirus has led to a recession in the world economy, but they believe that the recovery is possible in the second half of the year.

The Latin word "Recessus" means a "retreat". The main indicator of a recession in the economy is a GDP decline. This is what is happening in the US and Europe. Due to the spread of the coronavirus, businesses, retail outlets, catering outlets, schools, and universities are being closed. This leads to an economic contraction.

Analysts are trying to make forecasts when the situation will be back to normal —some are more optimistic, some are less:

● S&P forecasts the maximum global GDP growth in 2020 at 1.5 %;

● Goldman Sachs analysts estimated the GDP growth rate at 1.25 % and assumed the global economic recovery in the second half of the year;

● Morgan Stanley experts also believe that the recovery is possible in the second half of the year, and, according to their forecast, the growth rate will reduce to 0.9 %.

However, the forecasts still may deteriorate. The current drop in US stock indexes was the largest in the past 33 years, and the markets of China and Europe are in a weakened state.

Measures to stop the spread of the COVID-19 virus are becoming more severe. The border closure affected investor sentiment much more than the reduction of the key rate by the US Federal Reserve to 0–0.25 %.

Today, the main task of central banks is to support financial markets. Many regulators are reducing rates, but the panic is still not abating. In the currency market, the situation is far from being good. The USD/RUB currency pair is currently traded at ₽75.0634, the ruble fell by another 1.5 %. The EUR/RUB pair is traded at ₽83.5722, the ruble is down by 1 %.