Just How Bad Is It? Here’s The Economic Damage The Coronavirus Will Cause, According To Major Banks
Topline: As the coronavirus continues to roil stock markets and leads to widespread business shutdowns across the country, a growing number of top banks on Wall Street have been issuing increasingly dire forecasts on the economic turmoil caused by the pandemic, with many saying that a recession will hit in 2020—if it hasn’t already done so.
Goldman Sachs economists on Friday forecast an unprecedented 24% hit to U.S. second-quarter GDP, following a 6% decline in the first quarter, due to coronavirus; the bank also expects unemployment to surge to 9% and full-year GDP for 2020 to fall 3.8% on an annual average basis.
Bank of America warned late on Thursday that a recession due to the coronavirus pandemic is already here: “Jobs will be lost, wealth will be destroyed and confidence depressed,” the bank’s U.S. economist, Michelle Meyer, wrote in a note, as the Bank of America also forecast the economy to “collapse” in the second quarter, shrinking by 12%, with GDP for 2020 taking a 0.8% hit.
Morgan Stanley warned investors of the same thing: “Global recession in 2020 is now our base case,” the firm’s chief economist, Chetan Ahya, wrote in a recent note, predicting global economic growth to slow to 0.9% this year—the lowest level seen since the 2008 crisis.
Deutsche Bank predicts that the U.S. economy will contract by 12.9% in the second quarter, with the coronavirus-driven declines set to "substantially exceed anything previously recorded going back to at least World War II," according to a note Wednesday.
UBS similarly sees a “massive contraction” of almost 10% in second-quarter GDP, while also predicting a deep recession in the first half of 2020 due to the coronavirus pandemic.
But: Most of the economists at the big banks listed above still predict the economy will rebound later in 2020, or by 2021 at the latest.