Several analysts say that there will no longer be a full lockdown of the global economy amidst the resurgence of new coronavirus cases.
As different parts of the world witness new outbreaks, analysts claim countries are unlikely to impose restrictions that will completely halt economic activities.
Suresh Tantia, senior investment strategist at Credit Suisse’s APAC CIO office, explained that the situation is unlikely to return to its condition in March. This was when the pace of virus cases began to spread in the US and Europe, following the emergence in China last December.
“The second wave of virus is a concern for investors… but I think the key difference is that unlike last time in March, this time it’s highly unlikely that we would see a shutdown of the global economy,” he said.
“If you look at the March selloff, the reason why markets sold off was not because of the virus concerns, it was mostly because the global economy shut down,” Tantia, speaking to CNBC, noted.
“It’s a concern for the markets, but as long as we don’t see a repeat of March… I think markets will look through this and focus more on recovery over the next few quarters.”
The NBC News Count showed that the US recorded its highest number of cases in a single day on Wednesday, with 45,557 new cases at the end of the day. Meanwhile, California reported over 7,000 cases since Tuesday, experiencing a 69% increase in two days. Florida had a record number of new cases as well. These two states are considered the largest economies in the US.
Asia
In Asia, Reuters reported that South Korea is dealing with a second wave of coronavirus cases around its capital city of Seoul. A new cluster linked to a wholesale market in Beijing made its officials impose new restrictions.
However, analysts like Hartmut Issel, head of APAC equities at UBS Global Wealth Management, believe that countries are “very unlikely” to go down the path of a total lockdown again.
“Locking down an entire country… cost(s) you up to 3% of GDP per month, so even the richest nations on the planet cannot afford another two, three months complete lockdown,” he said.
Economic forecasts
The International Monetary Fund or IMF reduced its economic forecasts as the world suffers from the coronavirus crisis.
The organization warned that public finances may suffer heavily as governments try to fight the fallout from the health crisis.
The IMF predicts the economy will contract by 4.9% in global gross domestic product in 2020, lower than the 3% fall it predicted in April.
“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 reported Wednesday in its World Economic Outlook update.
IMF also reduced its GDP forecast for 2021, predicting a growth rate of 5.4% from the 5.8% forecast made in April.
