The coronavirus pandemic could cost the global economy a nightmarish $82 trillion over 5 years, a Cambridge study warns
The global economy could take a hit of some $82 trillion in a worst case scenario from the coronavirus, according to the Judge Business School at the University of Cambridge. In case of speedy recovery, an "optimistic loss" of $3.3 trillion is likely. But in the extreme event of an economic doomsday scenario, the global economy could lose $82 trillion in damages, the Centre for Risk Studies, part of the university, said. The figures are not meant to represent a shrinkage of the global economy, but rather how much potential growth the economy could lose if it slipped into a prolonged depression. "The world economy is still in the midst of the 'full stop' described by Daniel Defoe some 300 years ago," Keith Wade, chief economist at UK fund manager Schroders, said in a separate note. Visit Business Insider's homepage for more stories.
The global economy could be set back by a harrowing $82 trillion in damages related to the coronavirus pandemic over the next five years, according to recent findings by a University of Cambridge department that examines systemic risks. These cost projections are based on 2019 gross domestic product volumes which stood at $69.2 trillion for the world's 19 leading economies. The contrast, in comparison, is visibly massive. The Centre for Risk Studies at the University of Cambridge Judge Business School determined that the potential toll could range between what it called an "optimistic loss" of $3.3 trillion in case of rapid recovery, and $82 trillion in the event of an economic depression. While lost value of $82 trillion is the worst case scenario, the centre's consensus projection was a loss of some $26.8 trillion, or 5.3%, of global GDP in the coming five years. Read more: Tens of billions in redemptions, hundreds of billions in losses: Here's a look at how the hedge fund industry hemorrhaged money in March To put a figure on the potential impact to some of the leading global economies, the following five-year loss projections added more context (All %'s represent five-year GDP estimates):
US: Best case: $550 billion (0.4% of GDP). Worst case: $19.9 trillion (13.6%) UK: Best case: $96 billion (0.46%). Worst case: $2.5 trillion (16.8%) China: Best case: $1 trillion (0.9%). Worst case: $19 trillion (16.5%)
The centre was keen to stress that its metrics are not forecasts for what will happen, rather projections on what might occur. They are also not meant to reflect an economic contraction, but rather how much potential GDP is at risk. "The new calculations on GDP@Risk from the pandemic are not forecasts, but rather are projections based on various plausible scenarios that could unfold in the next five years related to the economic impact of COVID-19," Andrew Coburn, the centre's chief scientist said. Strikingly, financial markets do not seem to be weighing in a doomsday scenario. The S&P 500 continues to advance, making gains of over 30% compared to March. In other related impacts, future growth and return on assets could continue to be depressed up to 40 years after the passing of the pandemic, according to Keith Wade, chief economist at Schroders UK. Wade's recent note was first reported by Marketwatch. By citing studies on the long-term economic impact of past pandemics, Wade shed some light on outbreaks spanning back to the 14th century Black Death up to the H1N1 explosion of 2009. Read more: 10 big-money investors each share the single market risk they think traders are overlooking right now
"The world economy is still in the midst of the 'full stop' described by Daniel Defoe some 300 years ago," Wade said. "The virus is likely to reinforce the trends that were driving activity before the outbreak struck, by challenging the growth path, creating greater pressure on government finances and increasing inequality as technology becomes ever more pervasive." Read more: Buy these 14 bank stocks that are jarringly cheap and positioned for extreme moves higher, BTIG saysSEE ALSO: 'Buffett needs to listen to Buffett again': Investor was wrong to recommend tech-heavy S&P 500, Berkshire Hathaway shareholder says Join the conversation about this story » NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time
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Summary List Placement Dwindling odds of a new stimulus deal are driving economists to tamper expectations...Summary List Placement Dwindling odds of a new stimulus deal are driving economists to tamper expectations for US economic growth. JPMorgan on Thursday became the latest Wall Street giant to follow suit. Michael Feroli, the bank's chief economist, lowered his gross-domestic-product estimates for the fourth quarter of 2020 and the first quarter of 2021. The US economy will expand by 2.5% in the final quarter of 2020, he wrote in a note, down from the firm's previous forecast of 3.5% growth. First-quarter growth will reach 2%, down from the prior 2.5% estimate. Household incomes will see the "most immediate impact" from the lack of additional fiscal aid, Feroli said. Another spending package would drive a 24% annualized increase in disposable income through a second round of relief checks and the resumption of expanded unemployment benefits, according to the bank. But the lack of a near-term bill would drive a 12% contraction in disposable income next quarter. Read more: Sunil Thakor's global stock fund has returned more than 500% to investors since 2009 by precisely targeting high-growth companies. He explains how he finds long-term winners in a 'sweet spot' that minimizes risk. An encouraging trend in households' saving activity kept JPMorgan from lowering its GDP estimates further, the note said. The personal savings rate fell to 18% in July after peaking at 34% in April, and the firm expects a reading of 15% for August. Should job growth continue its upward trajectory this month, Americans may shift some of their saving to spending and lift growth in the fourth quarter, Feroli said. The absence of a new stimulus bill has its upsides, the economist added. JPMorgan lowered its 2021 fiscal-deficit estimate to $2 trillion from $3.5 trillion, citing the lack of a deal. The forecast stands to change before the year is out, as the presidential election could change the outlook for federal spending plans. A "blue wave" would likely prompt greater spending, and even a divided government would likely lean toward larger deficits over slashed spending, Feroli said. Read more: Northwestern Mutual's chief strategist told us the 6 market drivers he's watching most closely amid the volatility — and broke down where he's putting his money over the next 9-12 months Congress has largely shelved plans for a new relief bill. Republicans have shifted their focus to filling the Supreme Court vacancy left by Justice Ruth Bader Ginsburg's death. Legislators on both sides of the aisle are also rushing to pass a spending measure to avoid a government shutdown. Still, some hope remains for stimulus progress ahead of the November election. Treasury Secretary Steven Mnuchin indicated on Thursday that new aid was "still needed" and told legislators he remained in talks with House Speaker Nancy Pelosi on passing a measure. Separately, House Democrats moved forward with a $2.4 trillion proposal that includes funds for American families, airlines, and restaurants. JPMorgan's updated forecast meets projections made by its Wall Street peers in recent weeks. Goldman Sachs economists on Wednesday cut their fourth-quarter estimate to 3% from 6%, similarly citing a lack of new stimulus before the end of the year. Bank of America lowered its estimate to 3% from 5% in early September after calling stalled relief negotiations a "speed bump" for the nation's economic recovery. Read more: Bruce Petersen spent 18 years in the retail industry before amassing a real estate portfolio with nearly 1000 units. Here's the investing strategy he's using that's 'head and shoulders better' than a traditional approach.Join the conversation about this story » NOW WATCH: Why it's okay to eat the brown part of an avocado
World Economic Outlook says UK economy is on course to shrink by 10.2% in 2020Coronavirus –...World Economic Outlook says UK economy is on course to shrink by 10.2% in 2020Coronavirus – latest updatesSee all our coronavirus coverage The International Monetary Fund has said the global economy will take a $12tn (£9.6tn) hit from the Covid-19 pandemic after slashing its already gloomy growth projections for the UK and other developed countries in 2020.The IMF said it would take two years for world output to return to levels at the end of 2019 and warned that governments should be cautious about removing financial support to their fragile economies. Continue reading...
The International Monetary Fund on Wednesday again slashed its forecast for the global economy, seeing a...The International Monetary Fund on Wednesday again slashed its forecast for the global economy, seeing a deeper recession and longer recovery from the shock of the coronavirus pandemic. The fund now expects global gross domestic product to contract 4.9% this year, down from its 3% forecast in April. It also cut its 2021 expectations, and now forecasts growth of 5.4%, a step down from its previous estimate of 5.8% growth. Read more on Business Insider. The International Monetary Fund on Wednesday slashed its forecast for the global economy again, predicting a sharper recession and longer recovery from the impact of the coronavirus pandemic. The IMF now sees global gross domestic product shrinking 4.9% in 2020, a worse contraction than the 3% decline it previously forecast in April. The fund also foresees a slower-than-expected recovery — it cut its expectations for global growth in 2021 to 5.4% from 5.8%. "The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast," the IMF said in its World Economy Outlook update. The update comes after the IMF in April said the shock of the coronavirus pandemic and sweeping lockdowns to contain the disease would form the worst economic meltdown since the Great Depression. Now, the IMF's dire forecast reflects "greater scarring" from a larger-than-anticipated hit to activity, and continued lower demand from social distancing practices. "The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s," the IMF said. Overall, the new forecast would leave 2021 GDP more than six percentage points lower than in the IMF's pre-COVID projections of January 2020, according to the report. The IMF said that as in April, the current forecast comes with a "higher-than-usual degree of uncertainty" due to the pandemic. Read more: Aram Green has crushed 99% of his stock-picking peers over the last 5 years. He details his approach for finding hidden gems — and shares 6 underappreciated stocks poised to dominate in the future. The IMF also sees a severe hit to the global labor market, and said the loss of work hours in the second quarter is likely equivalent to more than 300 million full-time jobs. "The hit to the labor market has been particularly acute for low-skilled workers who do not have the option of working from home," said the IMF. "Income losses also appear to have been uneven across genders, with women among lower-income groups bearing a larger brunt of the impact in some countries." There are some bright spots, according to the IMF. Financial conditions have eased in advanced and to a lesser extent emerging economies, forestalling worse near-term losses. Announced fiscal measures are now about $11 trillion globally, up from $8 trillion in April, the report showed. Still, significant downside risks to the forecast remain without a medical breakthrough such as a vaccine or a sharp rebound in business activity. More lockdowns, tightening financial conditions, prolonged unemployment, and wider firm closures could lead to more economic pain. "This could tip some economies into debt crises and slow activity further," said the IMF. The IMF sees advanced economies experiencing sharper declines in GDP, forecasting an 8% contraction in 2020 compared with a 3% decline in emerging economies. US GDP is expected to decline 8% in 2020, worse than the IMF's April forecast of 5.9%. In 2021, US GDP may grow 4.5%, according to the report. The Europe area GDP is expected to slump 10.2% in 2020, and grow 6% in 2021. China is forecast to grow 1% this year and 8.2% next year, according to the report. Read more: A CEO overseeing $147 million outlines his 4-part strategy for identifying which stocks to buy — and shares 2 he sees primed to explode higher right nowJoin the conversation about this story » NOW WATCH: Tax Day is now July 15 — this is what it's like to do your own taxes for the very first time