Summer forecast 2020: A recession of historical proportions is expected in most countries this year.
A sharp economic downturn is expected this year, and the pace of recovery will depend on the epidemiological situation and a combination of economic policy measures, the Institute of Macroeconomic Analysis and Development (IMAD) said in its 2020 Summer Forecast.
The coronavirus epidemic, combined with strict health and protection measures, is a major negative shock to economic activity, which will shrink sharply this year. The depth of the fall in gross domestic product (GDP) and the dynamics of recovery will crucially depend on the epidemiological situation and the scope and content of economic policy measures. In the central scenario of the summer forecast for this year, IMAD predicts a 7.6% decline in GDP and 4.5% growth in 2021.
In most activities, the level before the outbreak of the epidemic will not be reached next year either. In the presence of the virus and the maintenance of certain restrictive measures, recovery will be gradual and differentiated by individual activities. Uncertainty and risks to an even greater decline in GDP this year, linked to possible recurrences of major outbreaks of the epidemic, remain high. The reintroduction of strict measures to limit the spread of coronavirus could lead to a deeper fall in GDP. In the event of the imminent development and availability of a vaccine or drug, or a successful permanent containment of the spread of the virus, there is also the possibility of a faster recovery of activity than anticipated in the central scenario.
Value added is expected to decline the most in catering, recreational, sports, cultural and personal services, hotel accommodation services and transport. A drop in manufacturing industries is also expected, exports and imports will be smaller. Investments, especially in equipment and machinery, will also shrink significantly. Private consumption will fall sharply, while government consumption will temporarily increase in a crisis.
The aggravated economic situation is also affecting the labor market. Intervention measures mitigate the negative consequences, but they cannot completely prevent them. Therefore, for this year, they expect a drop in employment and a significant rise in unemployment, and recovery may not occur until next year.
The situation is similar in our most important trading partners, where the outlook for economic growth has deteriorated sharply since mid-March 2020. Most countries expect a recession of historical proportions this year.