A global recession is forecast for this year as the coronavirus and subsequent market falls dampen growth, S&P Global warned.
The ratings agency revised downward its estimate for GDP growth in 2020 to 1% to 1.5%, from the 2.8% growth cited in a previous March 3 update.
S&P Global economists revised GDP growth against a backdrop of growing panic over the COVID-19 pandemic, volatile markets and growing credit stress. Risks remain firmly on the downside, wrote economists in an article, Tuesday.
U.S. growth was revised to -0.5% to zero from 1.6%; eurozone growth is now forecast at -1% to -0.5%, down from 0.5%; and China is expected to grow 2.7% to 3.2% in 2020, down from 4.8%.
"The initial data from China suggests that its economy was hit far harder than projected, though a tentative stabilization has begun," said Paul Gruenwald, chief economist at S&P Global, in a news release accompanying the article. "Europe and the U.S. are following a similar path, as increasing restrictions on person-to-person contacts presage a demand collapse that will take activity sharply lower in the second quarter before a recovery begins later in the year."
While markets in Asia appear to be stabilizing, restrictions on social contact in the U.S. and Europe have led to rising risk aversion and a sharp deterioration in views on economic activity, earnings and credit quality.
The article noted that central banks have moved to reduce interest rates, restart asset purchases and inject liquidity into economies. Fiscal measures are also being put in place.
Economists noted that data capturing the impact of COVID-19 on China "was much worse than expected," with industrial production falling 12.3% in January and February vs. the same period last year.
A global recession has also been forecast by other economists.
"Action by governments and businesses to contain the spread of the virus means that global recession now looks inevitable," Steven Bell, chief economist at BMO Global Asset Management, wrote Tuesday in a commentary. "Corporate profits will be hit hard."
The immediate outlook depends on the spread of new cases — with Europe now declared the epicenter of the pandemic, according to the World Health Organization — and how financial markets are functioning, Mr. Bell said.
"The fundamental supportive consideration is that the virus can and will be contained. Whatever the economic hardship caused in the process it should be temporary. Markets and economies will recover," he added.
Bank economists also predict a recession. A worldwide recession is now Morgan Stanley's "base-case" scenario, with growth expected to fall 0.9% in 2020, a note Tuesday said. Goldman Sachs expects growth to weaken to 1.25% this year. Both Morgan Stanley and Goldman Sachs expect a rebound in the second half of the year, but warned that the risk of even greater economic pain remains.
Bloomberg contributed to this article.